This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Basics of Building an ETF Portfolio

These days, I'm all about simplicity. Between juggling the kids, work and those obligatory social events (another birthday party?!), I'm generally too tired to deal with complications.

That's exactly why creating a portfolio consisting solely of exchange-traded funds has a lot of appeal.

With just a few of these funds, you can have total market coverage with very low expenses, very few tax issues and very little complications.

So are exchange-traded funds the simpler way to go to create a well-rounded portfolio?

It depends.

Ups and Downs of ETFs

When you buy an ETF, you are essentially buying a single security that represents a basket of stocks that track an index. And since the S&P 500 generally beats its actively managed brethren, holding a product that mirrors an index can be a good thing.

But we all know that looks can be deceiving. While ETFs may look like index funds, they actually trade like stocks. So that means you can do a bit more market-timing with your buys and sells since you can trade these things throughout the day. Even better, you can short ETFs, or, if you're audacious enough, buy them on margin.

You can't do any of that with your mutual fund shares.

ETFs' annual expenses are generally very low since the managers don't have a whole lot to do except watch an index all day (how's that for simple?). "Expense ratios are all mostly under 75 basis points," says Michael Iachini, senior research analyst for the Schwab Center for Investment Research. Some are even as low as 10 or 20 points. And with the average actively managed mutual fund hovering at 150 points, or 1.5%, that's a pretty good deal.

And since there's very little change in the indices, ETFs are very tax efficient, as well.

But there is a catch.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs