ETFs: Building blocks for a balanced portfolio
Whether you’re just beginning your investment journey or looking to diversify existing holdings, ETFs can play a valuable role in building a well-rounded portfolio.
Because they offer access to a wide range of asset classes, sectors and strategies, ETFs can help support different investment goals and risk levels.
Long-term growth
ETFs can be a powerful vehicle for long-term growth. Originally designed to track the performance of major indexes such as the S&P 500 Index, ETFs now cover a broad spectrum of equity options, from global market ETFs with multi-region exposure to more focused ETFs that target specific geographies and sectors. This range of options provides opportunities for growth across different markets.
Consider Fidelity All-International Equity ETF, Fidelity All-American Equity ETF, Fidelity All-Canadian Equity ETF and Fidelity All-in-One Equity ETF.
Income generation
ETFs can play a crucial role in generating cash flow.
ETFs may come in a variety of domestic and international fixed income options, as well as equity, specialty and real estate investment trust (REIT) options. Some ETFs employ advanced strategies, such as buying and writing options, to enhance income generation. These income-focused ETFs can provide regular payouts and may help diversify the downside risks in your portfolio.
Consider Fidelity Global Monthly High Income ETF, Fidelity Global Core Plus Bond ETF, Fidelity Core U.S. Bond ETF, Fidelity Systematic Canadian Bond Index ETF and Fidelity Equity Premium Yield ETF.
Safeguarding capital and combating inflation
For investors seeking to safeguard their capital, ETFs can help with this too. Money market and short-term fixed income ETFs, including short-term treasuries, are designed to protect the value of your investments. Additionally, specialty ETFs that invest in inflation-hedging assets such as commodities, currencies, real assets, real estate, etc., may help to potentially combat inflation and preserve purchasing power over time.
Consider Fidelity Canadian Short Term Corporate Bond ETF.
Minimizing volatility and downside protection
Managing volatility is essential for maintaining portfolio value. Low-volatility factor-based ETFs and dividend-focused ETFs may offer stability during market downturns. Treasury and fixed income ETFs are also effective in reducing portfolio volatility.
Consider Fidelity International Low Volatility ETF, Fidelity International High Dividend ETF, Fidelity U.S. High Dividend ETF, Fidelity U.S. Low Volatility ETF, Fidelity Canadian High Dividend ETF and Fidelity Canadian Low Volatility ETF.
Tactical exposure
Some investors use ETFs to adjust their portfolios based on market views or near-term goals. For instance, sector-specific ETFs (like energy or technology) and factor-specific ETFs (like value or quality) allow investors to express a view on a specific part of the market without selecting individual stocks.
Consider Fidelity Factor ETFs.
Understanding the risks of ETFs
ETFs may be subject to market fluctuations, liquidity constraints, price volatility, and, in rare cases, fund closure. These factors can influence performance and trading outcomes depending on the ETF’s structure, strategy, and underlying assets.
Why choose ETFs?
There’s no one-size-fits-all approach to portfolio construction, but ETFs offer the flexibility to play different roles depending on your goals, time horizon and risk appetite. Consider how each type of ETF fits into your broader plan and remember that building the right portfolio for you is essential for achieving financial well-being.
