Connect with us


The lowdown on common EFT investments



PHUKET: Given that so few managed funds are able to consistently beat important market benchmarks, Exchange Traded Funds (ETFs) are great investments, because they track and replicate the performance of key market indices at a minimal cost. However, the popularity of ETFs has led to their proliferation with some being better investments than others. So what are the best ETFs to own and which ones should you avoid?

Without naming individual ETFs, here are some general rules of thumb for selecting the right ones for your portfolio:

Buy ETFs that track important indices

ETFs tracking big name indices or markets like the Dow Jones Industrial Average, the S&P 500 and the Nasdaq should form the bulk of your ETF portfolio, but don’t overlook those that track other big indices like the Russell 2000 (small company stocks), those that track important sector indices (for example, the Dow Jones Utilities Average) and those that track important foreign stock indices like London’s FTSE, Tokyo’s Nikkei or the MSCI Emerging Markets Index. Moreover, don’t forget about bond ETFs which, like bonds, tend to do well in recessions or bear markets.

Avoid ETFs tracking obscure sectors or indices

ETFs have proliferated to such an extent that Vanguard’s founder John Bogle once sarcastically wrote in a Wall Street Journal op-ed: “Can you believe we now have an Emerging Cancer ETF?” That ETF, among others, has since closed after either failing to attract enough assets or after delivering poor returns to investors. You should also be aware that Bogle has said that individual sector and country ETFs are probably “too narrow for most” investors, but there might be times when such investments make sense.

Stick with plain vanilla ETFs

There could also be times where having a small position in so-called “inverse” ETFs (which short the market), leveraged ETFs (which use leverage in an attempt to generate outsized returns) or those tracking non-traditional assets (commodities) can make sense. However, you need to understand these ETF investments come with added and potentially significant risks while Vanguard’s Bogle has gone so far as to say that inverse and leveraged ETFs are where the “fruitcakes, nut cases and lunatic fringe” can be found.

Avoid illiquid ETFs

A major problem with ETFs tracking obscure sectors or markets along with some inverse or leveraged ETFs is their lack of liquidity because not many investors or traders are buying or selling them. This lack of liquidity could lead you to pay too much to buy and sell them.

Read the prospectus

The good thing about most plain vanilla ETFs is that they are fairly straightforward investments –meaning even less experienced investors should be able to read the prospectus and understand what they are doing. However, if reading the prospectus leaves you confused or if the prospectus is not well explained in plain simple English, you should find another ETF to invest in.

Be very careful when investing in commodity ETFs

There are two types of commodity ETFs – one type owning the physical commodity (say, gold bars) and the other type owning commodity futures contracts – meaning you need to read the prospectus carefully to understand the risks involved. Moreover, be aware that since commodity ETFs do not invest in securities, they tend to be regulated differently or are less regulated than other investments.

Avoid high fee ETFs

Most big ETFs on the market today will charge fees as low as the 0.04% to 0.25% range but there are some ETFs out there, usually “managed” ones or those with more exotic investment strategies (e.g. they invest in commodities, short the market or use leverage) which might charge fees as much as 1% or 2% (or even more). However and given the wide selection of low cost ETFs available, there is little reason to invest in one that comes with such high fees.

In conclusion, EFTs are a great way to diversify, lower expenses and grow your money. If you are unsure of which ETFs to put in your investment portfolio and how to buy them, call me for a free consultation and get your portfolio invested in the most efficient way possible.

Don Freeman is President of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand. He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email:

— David Mayes


Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Video4 hours ago

Timeline of the mass shooting in Thailand

Crime6 hours ago

Finnish CEO detained for alleged mistreatment of 1,100 Thai berry pickers

Thailand6 hours ago

Thailand News Today | No drugs detected in system of daycare center killer

Sponsored13 hours ago

5 reasons why Thailand educators shouldn’t miss Bett Asia in Bangkok this year

Myanmar6 hours ago

Burmese junta sentences Japanese journalist for sedition and other charges

Thailand6 hours ago

Thai woman & foreign men charged for child sex trafficking in Pattaya

Guides6 hours ago

10 strange laws to be aware of in Thailand

Join the conversation on the Thaiger Talk forums today!
Thailand7 hours ago

Love rat Thai soldier threaten’s Israeli husband of adulterous wife

Best of7 hours ago

Outstanding halal restaurants in Bangkok

Pattaya7 hours ago

Pattaya dwellers want public restrooms built faster at pier

Thailand7 hours ago

No Buddhist temples willing to cremate body of daycare centre killer

Phuket8 hours ago

AI upgrade planned for pier in Phuket

Medical8 hours ago

When snakes strike, why not call for the chicken-ass squad?

Crime8 hours ago

Massacre in Thailand: No drugs detected in system of daycare centre killer

Thailand8 hours ago

Woman’s body in suitcase identified as Lao millionaire

Crime9 hours ago

Massacre in Thailand raises questions on gun control

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11