What role do ETFs play in a diversified investment portfolio?

ETFs can play an important role in a diversified investment portfolio. They can provide exposure to a wide range of asset classes, sectors, and geographies, allowing investors to achieve broad market exposure and diversify their risk. ETFs can also be used to target specific investment themes, such as socially responsible investing or emerging markets, allowing investors to align their portfolio with their personal values or investment goals.

One of the key benefits of ETFs in a diversified portfolio is their low cost. Compared to actively managed mutual funds, ETFs typically have lower expense ratios, which can translate into higher returns over the long term. ETFs also offer intraday trading, which can provide greater flexibility in managing a portfolio and taking advantage of market opportunities.

However, it's important to note that ETFs are not without risks. Like any investment, they can be subject to market volatility and may experience losses. Additionally, some ETFs may be more volatile than others, depending on their underlying assets and investment strategy. As with any investment, it's important to conduct thorough research and due diligence before investing in an ETF.