“The essence of effective portfolio construction is the use of a large number of poorly correlated assets”
– William Bernstein
ETFs
ETFs are baskets of securities that track specific indexes, investment styles, industry sectors, regions, countries and commodities. ETFs trade like individual stocks on the major stock exchanges. Using ETFs allows Main Management to create comprehensive investment portfolios with broad diversification at a minimal expense.
ETFs provide:
Diversification
Transparency
Low expense ratios
Tax efficiency
Liquidity
>> know what you own, real time pricing
>> high expense ratios adversely affect performance
>> minimize effect of capital gains distributions
>> volume does not equal liquidity
Realizing that markets, not security selection, produce returns, Main Management lowers individual issue selection risk (Lehman Brothers, Fannie Mae, Freddie Mac, AIG)by reducing portfolio turnover and excessive transaction costs that so often fails active stock managers. As investors, we are not looking to find the needle in the haystack, but looking for the right haystack.
Additional information on Exchange Traded Funds:
BlackRock (iShares)
Bank of New York/Merrill Lynch (HOLDRS)
State Street Global Advisors (SPDRs)