Exchange traded funds allow investors to capture broad markets. However, investors should be mindful of what ETFs they pile into as layering the investments may inadvertently overweight a portfolio to a market segment.
“When you purchase an ETF, you might end up with more or less than you bargained for due to the variety of factors that comprise the fund,” writes Scott Kubie, chief strategy officer at CLS Investments, forInvestmentNews. “Your portfolio can become overexposed in a manner you didn’t intend because the type of ETFs you purchased brought additional exposures along with them.”
CLS Investments points out that investment portfolios are beginning to tilt toward larger allocations in consumer staples and health care stocks. While these defensive sectors have performed in recent years, there is no guarantee the outperformance will last.