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Using ETFs to build your portfolio

by , 13 November 2015

Exchange traded funds (ETFs) give you an easy and cost effective way to build a diversified portfolio of shares. With a wide array of ETFs on the market, you can pick and choose the ones that suit you best.

So how should you go about it?

Read on to find out more…


How to start building your portfolio of ETFs

 
You can use ETFs to build up a core portfolio and to add exposure to other parts of the market.
 
For example, you could use an ETF concentrating on the JSE Top 40 Index to give you exposure to the local market along with ETFs following international indexes to add offshore diversification.
 
You could consider buying into a gold-backed ETF to give you exposure to the precious metal. And even an ETF focusing on dividends to boost the dividend yield of your portfolio.
 

Look to offshore ETFs for more growth potential

 
If you don’t mind using your offshore allowance, you could increase your chances of growth by taking on more risk. 
 
For instance, you could look to buy ETFs focusing on emerging and developing markets. You could buy funds concentrating on aspects such as global infrastructure, alternative energy providers and private equity.
 
If you want to take a more hands-on approach to your portfolio, you could try to take advantage of short-term fluctuations in the market. 
 
For example, if the rand looks like it’s going to weaken, you could increase your exposure to the JSE Top 40 Index. Or if you think the price of gold is going to rise, buy more gold-backed ETFs.
 

You can trade ETFs

 
If you’re happy to take on the additional risks that come with trading, you can also trade ETFs. This gives you the opportunity to short the market or specific indexes too. 
 
But you must be comfortable with the extra risks involved to do this.
 
So there you have it. Using ETFs to build your portfolio.
 
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