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ETF Managed Portfolios Require a Dose of Caution 

October 2, 2014
Adam Zoll, Morningstar

The increasingly popular investment tool provides advisors and their clients with sophisticated allocation strategies, sometimes at an elevated price.

In a sense, the idea of ETF managed portfolios is nothing new. The financial industry has long offered products designed to achieve investors' allocation goals, such as balanced funds that own both stocks and bonds or funds of funds that hold multiple mutual funds in different allocations in order to achieve a desired mix. ETF managed portfolios are designed similarly but are built using exchange-traded funds, typically index-based ones. In a sense, this structure de-emphasizes security selection--the choices active fund managers make to buy and sell specific stocks and bonds--and puts greater emphasis on allocation decisions. It's also a way for financial advisors to outsource the portfolio management part of their job, freeing them up to focus on other areas such as tax management, insurance, or estate planning if they believe they can add more value that way.

Read more: Morningstar

 
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