4 Strategies to Make ETFs Work for You

We show you how to use exchange-traded funds to boost your returns and hedge your bets.

Cast your gaze over the financial innovations of the past few decades and you'll see a junkyard of broken-down contraptions. Interest-only mortgages, for example, decay alongside synthetic credit-default swaps and auction-rate securities. The cautionary tale in these instruments is plain: When it comes to your finances, you should run away from anything that smacks of being the latest hot new thing. If this kind of no-nonsense reasoning has led you to shun exchange-traded funds, we applaud your discretion. But 17 years after the first ETF hit the U.S. market, it's time to reconsider.

Notwithstanding the shocking collapse of dozens of funds on May 6, ETFs are, arguably, the most successful new financial product in recent memory (for more on the flash crash, see How to Buy and Sell an ETF and What Can Go Wrong With ETFs). Investors around the globe today hold more than $1 trillion in ETFs. Assets in ETFs held by U.S. investors have tripled in the past five years, to $793 billion. And about half of the 902 ETFs available to Americans were created in just the past three years.

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Elizabeth Leary
Contributing Editor, Kiplinger's Personal Finance
Elizabeth Leary (née Ody) first joined Kiplinger in 2006 as a reporter, and has held various positions on staff and as a contributor in the years since. Her writing has also appeared in Barron's, BloombergBusinessweek, The Washington Post and other outlets.