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ETF can easily fulfill the average investor’s goal of portfolio diversification and returns that meet/beat a benchmark. With investing only in a handful of exchange traded funds, the portfolio becomes extremely diversified, liquid and profitable. Here are five types of ETFs which can be the ideal candidates for long-term investing and to include in an ETF only portfolio.

• ETF Tracking Large Cap Stocks – ETFs which track large cap stocks traded on major US exchanges such as NYSE, S&P and NASDAQ are extremely liquid and can offer (almost) steady returns.
• ETF Tracking Small Cap Stocks – ETFs which track small cap stocks traded on US exchanges like Vanguard Small-Cap can often offer returns that beat those tracking large caps.
• ETF Tracking International Stocks of Developed Markets – This helps you to profit from the companies and economies of many European nations.
• ETF Tracking International Stocks of Emerging Markets – Emerging market ETFs let you profit from some of the fastest growing economies of the world; of many Asian and European nations. Statistics show that these ETFs beat all others with their higher returns; but can also be risky.
• Fixed income ETF or Bond ETF – This ETF can offer steady returns and can be considered as a hedging against stock market volatility.

The portfolio allocation for the above ETFs can vary according to investing goals. An investor opting for steady returns can allocate more money to large cap stocks and fixed income ETFs. Similarly an investor opting for quick portfolio growth can invest more in small cap stocks and emerging market ETFs. There are many other ETFs which can offer returns. Many new age ETFs, smart ETFs and leveraged ETFs, can be used to beat markets; but are extremely risky for long-term investment. When choosing an ETF from its kind, it is better to choose one with a long history, higher asset value and with higher annualized returns.

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