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How to build a portfolio using ETFs

by , 12 March 2015

If you don't want to invest in individual stocks, exchange traded funds (ETFs) provide you with an easy way to invest in specific sectors of the stock market.

These funds offer you instant diversification. And, compared to buying the underlying shares in a fund, they're cost effective.

So how can you use ETFs to build a portfolio? And what other options do they give you?

Read on to find out…


Using ETFs as an investment tool


There are a number of different ways you can use ETFs to build a portfolio.

For example, you could invest in one of the ETFs concentrating on the JSE’s Top 40 Index. This will give you exposure to South Africa’s largest listed companies.

You could add some offshore flavour to this by investing in international trackers. This will help to further diversify your portfolio.

Then you could add specific sectors or commodities, such as property or gold.

If you’re looking for income, don’t forget about the ETFs which invest in the top dividend paying companies.


How to give your portfolio more room for growth using ETFs


If you want to invest in some higher risk areas that have the potential to give your portfolio a growth boost, you could include some emerging market funds. You’d have to invest offshore for these.

And if you’re interested in investing offshore, there are a number of ETFs that give you exposure to other potential high areas of growth, such as alternative energy and private equity.


Gear up your returns using ETFs


If you have an appetite for risk, you could also use single stock futures to trade ETFs.

This means you could benefit from the gearing these instruments give you. And by trading single stock futures, you can short an index, potentially profiting from it falling in value.

So there you have it, how to build a portfolio using ETFs.

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How to build a portfolio using ETFs
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