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NEW YORK (AP) - With the number exchange-traded funds rising, more investors are becoming aware of the trading strategies associated with sector ETFs. These baskets of stock can minimize the hazards associated with owning individual equities, allow you to take short positions and make long-term bets. But some experts think sector ETFs are riskier than they appear.
Investors have used actively managed sector funds for many years to target market segments, from technology to energy and utilities, but expenses for such specialty funds have tended to be high. The low cost of indexing, and of ETFs in particular, is part of what makes these newer funds so appealing to institutional and individual investors alike.
You can collect several sector products for a diversified portfolio, or you can buy just one in order to play a theme, said Dan Dolan, director of wealth management strategies for Select Sector SPDRS, which divides the nine sectors of the Standard & Poor's 500 into ETFs. For investors looking to participate in trends, but disinclined to conduct the sort of deep analysis needed to make smart individual stock purchases, sector ETFs are an easy solution, he said.
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