At ETF PM, we choose to invest using exchange-traded funds (ETFs) for the following main reasons:
1) Asset allocation typically drives portfolio performance far more than individual security selection, and ETFs enable investors to shift asset allocation efficiently as needed.
2) ETFs are among the most liquid securities traded on the major stock exchanges. The largest ETF providers are also among the largest global asset managers, providing a measure of financial security.
3) Leading investors, such as David Swensen, manager of Yale’s endowment fund, strongly recommend ETFs. Mr. Swensen asserts that ETFs avoid many of the conflicts of interest inherent in mutual funds, while typically delivering better performance with lower cost and greater tax-efficiency (read his book, “Unconventional Success: A Fundamental Approach To Personal Investment”).