Using ETFs (Exchange Traded “Fund”s or “Shares”) in an investment portfolio is considered a prudent strategy for three simple reasons:
- Cost Efficiency: ETFs offer reasonable and transparent fees.
- Transparency: ETFs offer a flexible and transparent investments.
- Risk Management: ETFs help manage risk through diversification.
High fees erode investment performance!
The United States Government Accountability Office reported how much expenses matter: over the course of 20 years, a $20,000 investment, earning 7% annually and paying 0.5% annual fees, will grow to about $70,500. But if fees are 1.5%—a mere 1% difference—that same $20,000 will only grow to about $58,400.