Building a diversified portfolio of ETFs

ETFs are becoming more and more popular for investing money. However, many investors primarily see ETFs as tools for gaining broad exposure to the stock markets.

Martijn Rozemuller, CEO of Europe VanEck, will speak on 1 July at IEX Investors’ Day.

What many people are not yet aware of is that you can do much more through ETF investing than just investing in stocks. You can also invest in gold, invest in real estate or invest in bonds. A diversified investment portfolio can be built through various ETFs. A multi-asset ETF invests in multiple asset classes simultaneously, allowing you to achieve a high level of diversification through a single purchase.

Affordable diversify

ETFs track an index. For this reason, investing in ETFs is also known as index investing. Because there is no need for (expensive) active fund managers to analyze individual securities, ETFs can often be tied up much cheaper than active mutual funds.

ETFs can pay dividends or reinvest. VanEck offers both ETF categories. For example, we have a high-yield ETF that pays out dividends, but also many thematic ETFs that reinvest.

Thematic ETFs allow you to gain exposure to companies that you believe will benefit from certain long-term trends. We offer a wide range of thematic ETFs. For example, we have a semiconductor ETF, an esports ETF, a hydrogen ETF, a smart home ETF and a China ETF. We also offer various commodity ETFs, such as a mining ETF, gold ETFs and a rare earth ETF. Of course, we also have various sustainable ETFs in our range.

Reduce risk

It is important to realize that ETFs are associated with risks. The biggest risk is market risk: If markets fall, ETFs will not be left behind. Thematic ETFs in particular often also have a sector concentration risk or the risk of investing in smaller companies.

One way to reduce risk is to add bond ETFs to the portfolio. It can be both government bonds and corporate bonds. Government bonds come in safer varieties, such as high-quality eurozone bonds, or also more risky varieties, such as emerging markets local currencybonds.

An example of risky corporate bonds is fallen angels† These are bonds that were investment grade at the time of issue, but which have since been downgraded to non-investment grade (speculative). These bonds are available through our Fallen Angel ETF. The higher risk is usually offset by a higher coupon return and possibly a higher overall return. However, this is not guaranteed.

Investing in crypto via ETNs

Cryptocurrencies are a new asset class. VanEck has Exchange Traded Notes (ETNs) in its range that you can invest in crypto. ETNs are not ETFs, but they can be traded on the stock exchange. We offer Crypto ETNs that allow you to invest in Bitcoin, Ethereum, Solana, TRON, Polkadot, Avalanche and Polygon.

It is important to realize that cryptocurrencies are an extremely risky asset class, with extremely high volatility and various risks such as market risk, technology risk and regulatory risk. Some of the underlying risks may not be known yet. In our opinion, cryptocurrencies should therefore not represent more than a few percent of an otherwise broadly diversified portfolio.


Important messages

For informational and advertising purposes only. This information comes from VanEck (Europe) GmbH. VanEck (Europe) GmbH has been designated as a distributor of VanEck products in Europe by VanEck Asset Management BV, a management company under Dutch law and registered with the Dutch Financial Markets Authority (AFM). VanEck (Europe) GmbH, whose registered office is Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial company regulated by BaFin, the German financial market regulator. The information is intended to provide investors with general and preliminary information only and should not be construed as investment, legal or fiscal advice. VanEck (Europe) GmbH and its affiliates and affiliates (collectively “VanEck”) disclaims any responsibility with respect to any investor’s decisions based on this information regarding the purchase, sale or possession of investments. The views and opinions expressed here are those of the author / authors and do not necessarily reflect VanEck’s. The opinions are current at the date of publication and may change based on changing market conditions. Certain statements in this contribution may be estimates, forecasts and other forward-looking statements that do not reflect reality. We consider the information coming from third parties to be reliable. However, this information has not been independently verified. Therefore, its accuracy and completeness can not be guaranteed. All listed indices are measures for comparison of general market sectors and returns. It is not possible to invest directly in an index. All performance data refers to the past and is not a guarantee of future results. Investment involves risks, including any loss of principal. Read the prospectus and key investor information before investing. No part of this material may be reproduced in any form or by any means without the express written permission of VanEck. © VanEck (Europe) GmbH

The IEX editorial team consists of a team of content managers, journalists and analysts, with more than a hundred years of combined experience in producing and publishing investment information and opinions. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments. Editors may hold positions in one or more of the listed funds. Click here for an overview of their investments.

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