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Tips regarding ETFs for senior investors
BlackRock’s Salim Ramji: Investors turn to ETFs in volatile times
BlackRock global head of ETFs and index investments Salim Ramji discusses the popularity of ETFs after 2022 became the second best year for the investment vehicle on ‘The Claman Countdown.’
Senior investors who are seeking diversification in their portfolio may want to consider exchange-traded funds.
"An ETF is a pooled investment vehicle with shares that investors can buy and sell throughout the day on a stock exchange at a market-determined price," says Harman Johal, a wealth management market leader for Texas and Illinois at U.S. Bank in Houston.
Johal explains that ETFs are primarily passive investments that seek to replicate the performance of a particular index.
"ETFs have gained popularity in the last decade among institutional and individual investors and have grown to hold more than $3.4 trillion in assets in the last 25 years," Johal tells FOX Business. "Since ETFs are primarily passive, this results in lower expense ratios compared to actively managed funds. Some ETFs charge less than 0.05%, and that’s a sizable advantage over actively managed funds that charge an average of over 0.50%."
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To that end, he says that passive ETFs are also tax efficient as they track an index and do not require frequent trading, which helps to minimize the capital gains they have to distribute.
Why senior investors should consider ETFs
Johal says that according to Investment Company Institute research, a commonly cited goal with 76% of ETF households was retirement. Additional research by BlackRock found that among investors over the age of 70, 30% said they owned an ETF, he says.
"ETFs can provide cost-effective options for investors who are nearing retirement and are looking to change their portfolios from growth-oriented ones to portfolios that can provide a balance of growth and income," Johal says.