February 16, 2023

If you are interested in diversifying your portfolio, this is an important step toward developing a comprehensive financial strategy. You may be interested in making an investment in something like a mutual fund, to provide you with immediate diversification. However, one of the challenges with this is that you may not have a high initial deposit to invest in a mutual fund. You may instead consider alternatives, such as purchasing shares inside an exchange-traded fund. The vast majority of mutual funds come with a minimum initial investment.

However, ETFs are different because they trade like stocks. These can be purchased through practically any broker and come with a specific share price. So long as you have enough money to purchase the number of shares you desire, you may be able to buy just a few at a time. 

However, investing in ETFs often requires thinking about how this matches with your bigger financial strategy and financial plan. ETFs do have downsides. First of all, you’ll need to pay a trading commission every time you choose to make a trade, which can be anywhere from $4 to $11+, which can quickly eat into the value of your investment.

Second, you will need to purchase whole shares in order to invest in ETFs. If you purchase ETFs with higher amounts of money and purchase them less frequently, you may be able to minimize your overall transaction costs.

At Shah Total Planning, we work with you to make sure you understand each aspect of your chosen investment strategy, and to help you create a holistic and flexible plan for your future. The support of our financial team can help ease this process and make sure that all of your primary concerns are included in your financial plan, including your risk tolerance, diversification, and your interest in investing in places such as ESG opportunities.