By Keith Fitz-Gerald Investment Director Money Morning/The Money Map Report One of the things people don’t understand about buying gold for diversification is that it doesn’t work all the time. It works over time. That means that you can’t simply switch from one asset class to another when the going gets tough and expect miracles. Nor can you expect higher returns. And that’s the really cruel part. Many so-called alternative investments, gold being the most notable, are being sold right now on the basis of recent high returns to salivating investors desperate to stop the bleeding in their portfolios. No question, the yellow metal offers diversification; but near all time highs, its “protection” is debatable at best, when viewed against the harsh light of historical data. Which is why, at the risk of receiving some very testy email, we have to point out that if you bought ...

Since exchange-traded funds (ETFs) were first introduced in 1993, interest in them has grown steadily. In one year alone, ETF assets increased by a staggering 49% to reach $588.2 billion.

Although ETFs resemble index mutual funds, they actually have a lot in common with individual shares of stock. ETFs can be purchased on margin, sold short, and traded any time the markets are open. If you are seeking an investment that can offer the benefits of both mutual funds and stocks, an ETF may be an option to consider.

An ETF is a passively managed portfolio of securities that is initially sold by an investment company and thereafter traded in individual shares on a stock exchange. The underlying securities may all be from a certain sector or country, or they may track a broad market index.

Taking Stock

ETF share prices are more likely to be based on the demand for the shares themselves

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The book, The Intelligent Portfolio: Practical Wisdom on Personal Investing from Financial Engines by Christopher L. Jones, is a very comprehensive book which covers risk versus rewards, past performance versus future expected returns, market timing versus long term investing, and investing in individual stocks versus investing in mutual funds. He also discusses diversification, fees and expenses, and the tax consequences of investing. All of his recommendations are backed up with extensive research and presented in an easy-to-understand manner. The following is an excerpt from his book about retirement investing: An Unnecessary Gamble The Biggest Mistake in Retirement Investing By Christopher L. Jones Author of The Intelligent Portfolio: Practical Wisdom on Personal Investing from Financial Engines One of the most common mistakes made in the retirement investing world, particularly among 401(k) participants, is over-concentration in an employer's stock. In an analysis of more ...