How to Create an ETF Portfolio
- 1). Purchase shares in just a few indexes. You don't need to diversify as much as you do with other investments because ETFs are already diversified.
- 2). Purchase shares in indexes that complement the rest of your portfolio. This maximizes the ETF's capacity to hedge, which allows it to function most efficiently.
- 3). Ensure that you understand the risks of the indexes in which you purchase shares. For example, the Vanguard Total World Stock Index heavily invests in foreign stocks. This means that while you are shielded from the ups and downs of the U.S. stock market, you also run the risk of the exchange rate dropping.
- 4). Leave your ETF alone as often as possible. ETFs tend to have higher commissions on contributions and trades than other accounts. So, you should save up money and then contribute a couple times a year rather than contribute every time you have money available.
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