Why we use ETFs

etf-management

Using ETFs (Exchange Traded “Fund”s or “Shares”) in an investment portfolio is considered a prudent strategy for three simple reasons:

  • Cost Efficiency: ETFs offer reasonable and transparent fees.
  • Transparency: ETFs offer a flexible and transparent investments.
  • Risk Management: ETFs help manage risk through diversification.

High fees erode investment performance

The United States Government Accountability Office reported how much expenses matter: over the course of 20 years, a $20,000 investment, earning 7% annually and paying 0.5% annual fees, will grow to about $70,500. But if fees are 1.5%—a mere 1% difference—that same $20,000 will only grow to about $58,400.

This is approximately a 17% difference in asset value!