Pursuing Portfolio Balance? A Look at Exchange-Traded Funds

Want to find a balance in your portfolio between stocks and funds? Learn why exchange-traded funds could be worth a look.

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https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Finding portfolio balance: Exchange-traded funds could offer balance between funds and stocks
3 min read

Looking to strike a balance between stocks and funds in your portfolio? Since their emergence in the early 1990s, exchange-traded funds (ETFs) have become prominent financial instruments in the investment world. Combining the trading agility of an individual stock with the market breadth of a mutual fund, the ETF strikes a balance between both worlds. 

With a market scope as wide as it is diverse—from sectors, indexes, and commodities, to international and emerging markets, and more—ETFs can provide market selection, diversity of exposure, and ease of trading, which can appeal to today’s digitally empowered do-it-yourself investor. (Brush up on ETF basics here.)

As with any investment, however, it's important to consider transaction costs. Some investors shoot for a combination of low-cost ETFs and commission-free trading. For example, recently, TD Ameritrade essentially tripled its commission free ETF trading program to 296 products offered by 8 leading providers. That's more commission-free ETFs than any firm in the industry.   

ETFs and the DIY Investor: It’s a Balancing Act

So, if you’re a DIY investor who plans on building and managing an ETF portfolio, it can be important to pay attention to portfolio balance. This “balance”—the allocation and weighting of your portfolio’s individual assets—is what collectively embodies your investment strategy’s potential and sets it in motion.

Let’s back up and revisit the definition of a balanced portfolio allocation. Simply put, a balanced portfolio allocation is one whose mix of assets offers an investor an acceptable proportion of risk to reward based on the individual's risk tolerance. Of course, risk/reward will vary among individual investors whose financial objectives, time horizon, capital resources, and risk tolerance differ. So it’s important to note that there’s no such thing as a perfect balance. However, you can aim to achieve a reasonably effective balance that’s appropriate to your particular financial goals and profile.

One guideline is to select ETFs with specific characteristics that match your financial objectives. To do that, answer some basic questions, including:

  • Am I investing for the short term, intermediate term, or long term?
  • Is my investment style more conservative, aggressive, a disproportionate mix of both, or somewhere in between?
  • Given my time horizon, how concentrated (e.g., small sectors) or widespread (e.g., indexes) should my market exposure be?
  • Which ETFs might be appropriate for my time horizon?
  • Should I diversify into different asset classes (e.g., commodity ETFs) or international/emerging markets?
  • How many shares of each ETF should I hold?
  • Is my overall ETF mix highly correlated (potentially moving in the same general direction, whether up or down), or is it diversified to the extent that some ETFs may rise in value as others fall?
  • What are the fees and expenses associated with holding an ETF?
  • How do I compare ETFs that seem similar?
  • What are the trading costs (commissions) to buy and sell ETFs?

Of course, there are plenty of other questions to ask. Managing your own money is an ongoing learning process, and the challenges increase the more knowledge you gain. Just be aware of the risks and make sure you can absorb the losses that naturally come with the territory.

With the right tools, you may be able to shorten your learning curve just a bit. This is where the TD Ameritrade ETF Market Center comes into play.

Tools to Help You Build Your ETF Portfolio

The ETF Market Center provides one of the broadest collections of ETF research tools, third-party market insights/analyses, and ETF products out there. It’s also home to a newly-expanded list of 296 commission-free ETFs. So it provides a wide selection of diversified market products with trading cost savings, all of which are open to virtually any TD Ameritrade client. 

The ETF Market Center gives you access to different market types, categories of exposures, and various market groupings.

So yeah, it’s an important resource for an investor aiming to build a balanced ETF portfolio. The ETF Market Center can help you define your desired scale of market exposure and diversification by:

  • Sector
  • Investment style (from small to large cap, value or growth stocks)
  • Commodity markets
  • Global and emerging markets and
  • Individual stocks (contained in various ETFs)

You can use the ETF Market Center’s fund profile for fundamental or technical research. If you need professional commentary or analysis, you can access third-party commentary. Last but not least, the Market Center’s commission-free ETFs provide you with a wide range of low-cost investment opportunities.

No time or ability to self-direct your investments? Consider managed portfolio solutions. If you need professional assistance, TD Ameritrade has financial consultants available to help you plan your goals. 

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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ETFs are subject to risk similar to those of their underlying securities, including, but not limited to, market, investment, sector, or industry risks, and those regarding short-selling and margin account maintenance. Some ETFs may involve international risk, currency risk, commodity risk, leverage risk, credit risk, and interest rate risk.  Performance may be affected by risks associated with nondiversification, including investments in specific countries or sectors. Additional risks may also include, but are not limited to, investments in foreign securities, especially emerging markets, real estate investment trusts (REITs), fixed income, small-capitalization securities, and commodities. Each individual investor should consider these risks carefully before investing in a particular security or strategy.   Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).

Information provided by TD Ameritrade, including without limitation that related to the ETF Market Center and commission-free ETFs, is for general educational and informational purposes only and should not be considered a recommendation or investment advice. 

ETFs purchased commission-free that are available on the TD Ameritrade ETF Market Center are available generally without commissions when placed online in a TD Ameritrade account. Other fees may apply for trade orders placed through a broker or by automated phone. 

Advisory services are provided by TD Ameritrade Investment Management, LLC (“TD Ameritrade Investment Management”), a registered investment advisor. Brokerage services provided by TD Ameritrade, Inc. TD Ameritrade Investment Management provides discretionary advisory services for a fee. Risks applicable to any portfolio are those associated with its underlying securities. For more information, please see the Disclosure Brochure (Form ADV Part 2A).

Particular commission-free ETFs may not be appropriate investments for all investors, and there may be other ETFs or investment options available at TD Ameritrade that are more suitable. 

Short-Term Trading Fee (Holding Period for 30 Days).  ETFs available commission-free that participate in the ETF Market Center may be subject to a holding period that commences with any purchase and extends through the following THIRTY (30) calendar days.  An account owner must hold all shares of an ETF position purchased for a minimum of THIRTY (30) calendar days without selling to avoid a short–term trading fee where applicable.  There is no limit to the number of purchases that can be effected in the holding period. Any order to sell within THIRTY (30) calendar days of last purchase (LIFO – Last In, First Out) will cause an account owner's account to be assessed a short–term trading fee of $13.90 where applicable. For the purposes of calculation the day of purchase is considered Day 0. Day 1 begins the day after the date of purchase.  The short–term trading fee may be applicable to each purchase of each ETF where such ETF is sold during the holding period. The short–term trading fee may be more than applicable standard commissions on purchases and sells of ETFs that are not commission-free.

Information provided by TD Ameritrade, including without limitation that related to the ETF Market Center and commission-free ETFs, is for general educational and informational purposes only and should not be considered a recommendation or investment advice. 

TD Ameritrade receives remuneration from certain ETFs that participate in the commission-free ETF program for shareholder, administrative and/or other services.

No Margin for 30 Days.  Certain ETFs purchased commission free that are available on the TD Ameritrade ETF Market Center will not be immediately marginable at TD Ameritrade through the first 30 days from settlement. For the purposes of calculation the day of settlement is considered Day 1.


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Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

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