Portfolios that seek diversification across multiple asset categories but that include only a few select individual stocks expose an investor’s asset base to adverse forces and stresses that are unique to those stocks. To reduce this risk, investors can use ETPs to allocate investments among several asset categories.

This practice simultaneously enables investors to test different industry sectors, fund management strategies, and investment products. The investor can then retool a portfolio with regular feedback from asset categories to better correspond that allocation with his or her personal wealth management strategies.

Independent third-party wealth advisors have honed their knowledge and expertise in the ETP markets to serve their investor clients with analysis and recommendations that benefit from their insights into both traditional and more exotic investment products. ETPs do more than just allowing investors to formulate a diverse portfolio concerning asset classes and industry sectors. With ETPs, an investor also benefits from:

• Margin or options trading and short selling

• Virtual real-time transparency of the assets that are held in the ETP

• Liquidity in volatile markets

• Tax-efficient growth with fewer tax effects than capital gains impose when individual stocks are purchased and sold

• Lower fee structures to preserve core capital value

• Access to ETPs that are available in the broader markets with analysis and management expertise that reflects a diverse group of asset classes

• Passively-managed exchange-traded index funds (ETFs)

• Actively-managed ETFs that focus on assets in both established and emerging markets

• Commodity and currency funds

• Fixed or variable income funds, and growth funds

• Futures, options, warrants, and other derivative products

• Assets with high, medium, or low-risk profiles

No unique blend of different asset classes or categories will be appropriate for every investor. ETPs allow investors to achieve an individualized and diverse portfolio that satisfies the investor’s unique wealth management plan-minimizing the drawbacks of traditional single stock selections.