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Crafting Your Portfolio? Consider Exchange-Traded Funds (ETFs)

February 28, 2018
Sculptor: Crafting a portfolio with exchange-traded funds
Getty Images

The great Renaissance artist, Michelangelo, once said that every block of stone has a statue inside it, and it is the task of the sculptor to discover it. Michelangelo’s “stone” can be taken as a metaphor for almost anything that must be crafted with great precision. That said, it doesn’t take much of a leap of imagination to see how this maxim applies to the craft of building an investment portfolio.

Much like an artisan, your goal as a self-directed investor is to meticulously design a portfolio that reflects your financial goals, interests, time horizon, and risk tolerance. As in Michelangelo’s example, your proverbial “block of stone” is none other than the bundle of markets and assets available to you. And the larger your bundle of markets, the more choices and flexibility you have in shaping your portfolio.

But as a retail investor, you might be wondering how you can possibly spread your money across an extended range of markets given your limited resources. There is a potentially low-cost solution to this obstacle: exchange-traded funds, or ETFs, can offer exposure to a wide variety of markets, sectors, and asset classes. And TD Ameritrade customers can start with the company’s ETFs Market Center, a broad collection of ETF products and research tools.

Using ETFs to Help Broaden Market Exposure

Before we continue, let’s remember that a well-designed portfolio can take on many different forms and can include a wide range of financial instruments. It can be narrowly focused, or highly diversified; customized to suit more conservative tastes, or designed to go all-out aggressive; limited to a single domestic sector, or open to a mix of global assets.

However you decide to build your ETF portfolio, make sure you understand how each fund’s investment objectives, risks, charges, and expenses align with your own financial goals and tolerance for risk. You can find most of this information in each ETF prospectus. [TD Ameritrade clients can call 800-669-3900 to obtain a prospectus. Read carefully before investing.]

Navigating the ETF Market Center

So how might you get started? First, you’ll need a comprehensive list of ETFs—preferably one that allows you to view ETFs by markets, asset classes, and investment style.

See figure 1 below. If you take a look at the tabs on the left-hand side (yellow box), you’ll notice that ETFs are categorized by market sector, investment style, commodities, global and emerging markets, and individual stock selection.

ETF market center


TD Ameritrade clients can use the ETF Market Center to target potential investments. Filter by sector, investing style, asset class, geography and more. Image source: For illustrative purposes only.

Sector. Suppose you’re interested in gaining exposure to a specific sector in the stock market.

ETF sector screener


By selecting, for example, Financial Services in the menu, the screener will pull up all available ETFs under the financial services category.

Notice that the green button toward the bottom right informs you that there are exactly 46 ETFs matching your preferred category. To see all 46, you simply click on that button.

If you look toward the middle of the window under “Highest rated ETFs,” you’ll notice that the second ETF on the list has a green price tag icon. The green price tag indicates that a particular ETF is commission-free (in fact, the ETF Market Center offers access to more than 300 commission-free ETFs).

Investment style. What if you are also interested in viewing ETFs by investment style? If you click on the “Match a style of investing” tab, the screener will retrieve a list of small- to large-cap ETFs containing value, blend, and growth securities.

Commodities. Let’s say you want to diversify your portfolio by including some commodity exposure. By clicking on the commodities tab, you can find a selection of ETFs across a wide range of commodity classes including agriculture, energy, industrial and precious metals, and more.

ETF emerging markets screener


Global and emerging markets. Perhaps you’re bullish about a specific region in the world. There are ETFs that can give you exposure to international equities. Just click on your preferred region.

Search by individual stock. And finally, if you want to search ETFs by individual stock, you can use the last tab to pull up all ETFs carrying your stock of choice. Just enter the stock’s ticker symbol into the search field and all ETFs containing that stock will be listed.

Detailed Analytics

With access to such an extensive range of markets, let’s not forget to drill down on each ETF, its components, and performance analytics.

Suppose you’re interested in a specific ETF. Clicking on it will pull up a collection of stats and tools including a comprehensive summary, performance, ratings and risk, portfolio holdings, and technical charts—all things that might help you better evaluate an ETF.

ETF statistics tools


Once you've identified a potential investment, you can research ETF performance and risk analytics, compare it to benchmarks, and read analyst ratings. Image source: For illustrative purposes only.

300+ Commission-Free ETFs

TD Ameritrade is also home to the widest selection of commission-free ETFs—more than 300 are available. If you want to view them all, TD Ameritrade’s Commission-Free ETFs page lists them by category, fund family, market cap, and alphabetical order.

While commission alone shouldn't determine whether you should consider a specific fund, commission-free investing at TD Ameritrade can have benefits, namely a savings of $6.95 on either side of a transaction (when held for more than 30 days). This means potentially reducing costs when you rebalance your portfolio, or if you invest via dollar-cost averaging.

Building a self-directed ETF portfolio can be a daunting task; there are so many ETFs to choose from. If you have no time at all to self-direct your investments, you could consider managed portfolio solutions from TD Ameritrade Investment Management, LLC.*

But if you’re up to the task, having access to a wide palette of markets from the start may give you the flexibility you need to design and construct your portfolio.

Carefully consider the investment objectives, risks, charges and expenses before investing. A prospectus, obtained by calling 800-669-3900, contains this and other important information about an investment company. Read carefully before investing.

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