Creating a portfolio with exchange-traded funds can work really well for the fix-it-and-forget-it investor like myself.
I want to invest wisely, but after the decision is made, please don't bother me about it again. I have to be at my son's baseball game and then figure out how to make purple icing for my daughter's birthday cupcakes.
As a refresher, an ETF is a single security that represents a basket of stocks that track an index. So that means while they look like index funds, these things actually trade like stocks. That also means you'll pay your broker a commission fee every time you buy or sell. So, if you're planning on making monthly contributions to your portfolio, ETFs might not be your best option.
The upside, though, is that ETF shares can easily be converted back to cash and don't have short-term redemption fees like many mutual funds do. That means you won't have to pay an early withdrawal charge because you withdrew the money before a specified time. And since ETFs basically mirror an index, you don't have to worry about excessive portfolio turnovers translating into capital gains hits come tax time.So, if you have some money to park and forget, these things could be the way to go. We'll offer some very basic sample portfolios for the different stages of life. Of course, there's no cookie-cutter answer -- your investment choices depend on your own situation -- so don't take these portfolios to the grave.