
When it comes to investing in dividend-paying companies, many investors seek opportunities beyond their domestic market. The [DVY](https://etfinsider.co/analysis-quote/dvy) ETF (Dividend Yield ETF) is often considered by investors looking to gain exposure to international dividend-paying companies. In this article, we will explore the benefits and considerations of using DVY to invest in such companies.

## DVY and International Dividend-Paying Companies

Investing in international dividend-paying companies can provide diversification benefits and access to potentially attractive yields. The DVY ETF, managed by BlackRock, tracks the performance of the Dow Jones U.S. Select Dividend Index. While the index primarily focuses on U.S. companies, it does include some international dividend-paying companies. However, it's important to note that the majority of companies in the DVY ETF are U.S.-based.
To gain exposure to international dividend-paying companies, investors may consider alternative ETFs that specifically target non-U.S. markets. For instance, the iShares International Select Dividend ETF ([IDV](https://etfinsider.co/analysis-quote/idv)) focuses on dividend-paying companies from around the world, excluding the United States.

##  What is DVY and how does it work?

DVY, the Dividend Yield ETF, is an exchange-traded fund that aims to track the performance of the Dow Jones U.S. Select Dividend Index. It invests in a portfolio of dividend-paying stocks from various sectors. DVY offers investors exposure to companies with a history of consistent dividend payments.

![DVY overlap Can I use DVY to gain exposure to international dividend-paying companies?](/uploads/main_blog_image_0dfaffb561.png)

## Can DVY provide exposure to international dividend-paying companies?

While the DVY ETF does include some international dividend-paying companies, the majority of its holdings are U.S.-based. For investors specifically looking for exposure to non-U.S. dividend-paying companies, alternative ETFs like the iShares International Select Dividend ETF (IDV) may be more suitable.

## What are the advantages of investing in DVY?

Investing in DVY can offer several advantages, including access to a diversified portfolio of dividend-paying companies, potential income generation through dividends, and the convenience of an exchange-traded fund structure. It allows investors to gain exposure to established U.S. dividend-paying companies in a single investment.
Source: BlackRock - DVY: Link to BlackRock's DVY ETF page

## What are the considerations when investing in DVY?

Investors considering DVY should be aware of the fund's concentration in the U.S. market and its specific sector allocations. It's crucial to conduct thorough research and understand the risks associated with any investment. Additionally, for those seeking broader exposure to international dividend-paying companies, alternative ETFs targeting non-U.S. markets may be more appropriate.

The DVY ETF offers investors the opportunity to gain exposure to dividend-paying companies, including some international firms. While primarily focused on U.S. companies, DVY provides access to a diversified portfolio of well-established dividend-paying stocks. However, investors should carefully consider their investment objectives and preferences, as well as explore alternative ETFs such as the iShares International Select Dividend ETF (IDV) for more targeted exposure to non-U.S. dividend-paying companies. As with any investment, thorough research and understanding of the associated risks are essential before making investment decisions.

Disclaimer: this article is intended for informational purposes only and does not provide any investment advisory services. It's important to conduct thorough research and consult with a qualified financial professional before making any investment decisions.

#### DVY quote and analysis
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The DVY ETF (Dividend Yield ETF) is often considered by investors looking to gain exposure to international dividend-paying companies.

DVY to international dividend-paying companies


When it comes to investing in exchange-traded funds (ETFs) and other financial instruments, it's important to understand the nuances and differences between various options. In this article, we will explore the distinction between two popular ETFs: [IEMG](https://etfinsider.co/analysis-quote/iemg) and [EEM](https://etfinsider.co/analysis-quote/eem). Whether you're a beginner or an experienced investor, this FAQ guide will provide you with valuable insights to make informed investment decisions.

## IEMG: A Closer Look

IEMG, or the iShares Core MSCI Emerging Markets ETF, is a widely recognized ETF that tracks the performance of large and mid-cap stocks in emerging markets across the globe. It offers investors exposure to a diverse range of countries, including China, India, Brazil, and South Africa, among others. With IEMG, investors gain access to a broad spectrum of emerging market equities, allowing them to participate in the growth potential of these economies. The fund is managed by BlackRock, one of the world's largest asset management firms.

## EEM: Exploring the Alternatives

EEM, or the iShares MSCI Emerging Markets ETF, is another popular ETF that focuses on emerging market equities. Like IEMG, EEM aims to track the performance of large and mid-cap stocks in emerging markets. However, there are some key differences between IEMG and EEM that investors should be aware of. EEM has been available for a longer period, and it has a higher expense ratio compared to IEMG. Additionally, EEM has a slightly different composition and weighting methodology compared to IEMG. 

![IEMG overlap What is the difference between IEMG and EEM?](/uploads/main_blog_image_0dfaffb561.png)

## Comparing IEMG and EEM

Now that we have a basic understanding of IEMG and EEM, let's compare them side by side. While both ETFs focus on emerging market equities, IEMG offers a broader exposure to a larger number of countries, while EEM has a more concentrated exposure to a smaller number of countries. Furthermore, IEMG tends to have a lower expense ratio compared to EEM, making it a potentially more cost-effective option for investors. However, it's important to note that past performance is not indicative of future results, and investors should conduct thorough research and consider their own investment goals and risk tolerance before making any investment decisions.

##  Making Informed Investment Decisions

In summary, the key difference between IEMG and EEM lies in their composition, geographic exposure, and expense ratios. While both ETFs provide investors with access to emerging market equities, IEMG offers a broader and potentially more cost-effective solution. However, it's crucial to remember that investing involves risk, and no ETF guarantees returns. Therefore, it's recommended to consult with a financial advisor or do thorough research before making any investment decisions.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We do not provide investment advisory services.

Source 1:        [IEMG issuer website](https://www.ishares.com/us/products/239724/ishares-core-msci-emerging-markets-etf)        
Source 2:        [Reuters article about IEMG](https://www.reuters.com/markets/quote/IEMG.A)

#### EEM quote and analysis
Discover the top holdings, correlations, and overlaps of ETFs using our visualization tool.
Our app allows you to build and track your portfolio.
To learn more about the [EEM](https://etfinsider.co/analysis-quote/eem) [iShares MSCI Emerging Markets ETF](https://etfinsider.co/analysis-quote/eem), access _our dedicated page now_.

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The key difference between IEMG and EEM lies in their composition, geographic exposure, and expense ratios. Consider using ETF Insider—a user-friendly app.

The difference between IEMG and EEM

As we enter the second quarter of 2023, there is growing anticipation and speculation about the outlook for the Q1 Gross Domestic Product (GDP) in the US, as it will set the tone for the remainder of the year. While there are a plethora of factors that contribute to economic growth or decline, four vital factors officially determine a country's GDP.

In this article, let's delve into some interesting insights (as we wait for official economic data for the first three months of the year) into whether the outlook for 2023 Q1 GDP is bullish or bearish based on what we have seen on these four factors:

## 1. Consumer Consumption
First of all, consumer consumption is a significant driver of economic growth or decline (it accounts for roughly two-thirds of the GDP). Despite challenges and issues (particularly in the banking industry), consumer confidence remained high in the first quarter due to a relatively stable job market and wages coupled with an almost complete reopening of the economy since the heights of the pandemic. This, in turn, resulted in increased consumer spending, particularly in the retail sector. Hence, consumer consumption will likely be a positive factor for Q1.

## 2. Domestic Investments
Second, domestic investments also play a critical role in GDP growth/decline. In the first quarter of 2023, there was a shift in investments in technology (mainly AI-related), renewable energy, and even real estate despite the rising rates. Nevertheless, the rising rates have hampered investments. This is, of course, unsurprising, given that this is one of the things that the Fed wants to slow down to curb inflation. Regardless, the stock market is still up by roughly 7% Year-To-Date (YTD), indicating a likely positive net investment result.
 
![S&P500 ETF filtered by sectors (ETF Insider web-app)](/uploads/spysectorsy2d_d9f04ca781.jpg)

## 3. Net Exports
On the other hand, net exports, which is the difference between total exports and imports, have been on the positive side for the longest time. This trend will likely continue to the first quarter of the year. Albeit, it was only a relatively slight increase considering this was likely offset by increased imports due to increased domestic demand. Hence, compared to the other factors, this might have a neutral impact on the GDP as a whole.

## 4. Government Spending
Finally, government spending is not only a critical factor in determining the GDP but also one of the principal fiscal policies employed by countries, including the US. In the first quarter of 2023, we saw a slight increase in government spending, particularly on infrastructure and defense (substantially to support its arms export to Ukraine). However, this was also offset by decreased spending on social programs. As a result, the impact of government spending on the GDP in the first quarter of 2023 is expected to be also somewhat neutral.

# Conclusion
Based on the four criteria discussed above, it is more likely that the outlook for the 2023 Q1 GDP is bullish. Consumer consumption and domestic investments are expected to positively impact the GDP, while net exports and government spending are expected to be on neutral territory. Nevertheless, this will only be confirmed once the US Bureau of Economic Analysis (BEA) publishes the official GDP result and breakdown later this month.

Given this uncertainty, it is essential to have a resilient portfolio that can withstand economic challenges and downturns. Fortunately, there are now sophisticated portfolio management tools, such as ETF Insider, that look out for you when things get rough and present you with a real-time visual breakdown of your investments, allowing you to adjust your exposure and diversification levels precisely to your needs.

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Bullish or Bearish Q1 GDP? Here are 4 Factors to Consider

We all know how big and popular US stock exchanges are, especially the NYSE and NASDAQ. However, as the global economy is increasingly interconnected, many investors are now searching for new opportunities to diversify their portfolios beyond the US markets.

In this article, we will highlight the five most popular non-US stock exchanges with a short background for each, their market capitalization, their respective performance over the past five years, and even their top three notable stocks listed on each exchange.

## 1. London Stock Exchange ($LSE)

a) Market Capitalization: $3.6 trillion

b) 5-Year Performance: +16%

c) Top 3 Notable Stocks:

HSBC Holdings (HSBA)

Royal Dutch Shell (RDSA)

Unilever (ULVR)

First and foremost – perhaps one of the most prominent globally – the London Stock Exchange, which is established in in 1801, is clearly one of the oldest stock exchanges in the world. LSE is located in the City of London and is part of the London Stock Exchange Group, including Borsa Italiana and Turquoise.

## 2. Shanghai Stock Exchange ($SSE)

a) Market Capitalization: $5.4 trillion

b) 5-Year Performance: +47%

c) Top 3 Notable Stocks:

Kweichow Moutai (600519.SS)

Industrial and Commercial Bank of China (601398.SS)

Ping An Insurance (601318.SS)

Second, founded in 1990, the Shanghai Stock Exchange is the largest stock exchange in the whole of China. Currently, it operates under the direct supervision of the China Securities Regulatory Commission (CSRC).

## 3. European New Exchange Tech ($EURONEXT)

a) Market Capitalization: $5.6 trillion

b) 5-Year Performance: +25%

c) Top 3 Notable Stocks:

LVMH Moët Hennessy – Louis Vuitton (MC.PA)

TOTAL SE (FP.PA)

Sanofi (SAN.PA)

Third, formed in 2000, Euronext is the leading pan-European exchange that operates multiple markets in Amsterdam, Brussels, Dublin, Lisbon, Oslo, and even Paris.

## 4. Hong Kong Stock Exchange ($HKEX)

a) Market Capitalization: $5.9 trillion

b) 5-Year Performance: +24%

c) Top 3 Notable Stocks:

Tencent Holdings

[AIA](https://etfinsider.co/analysis-quote/aia) Group

China Construction Bank

Fourthly, established in 1891, HKEX is one of the world's largest exchange operators. HKSE is also the primary exchange in Hong Kong and serves as a "gate" between China and international markets.

## 5. Tokyo Stock Exchange ($TSE)

a) Market Capitalization: $6.2 trillion

b) 5-Year Performance: +22%

c) Top 3 Notable Stocks:

Toyota Motor Corporation (7203.T)

SoftBank Group Corp. (9984.T)

Keyence Corporation (6861.T)

Last but not least, founded in 1878, the Tokyo Stock Exchange is the largest stock exchange in Japan and the third-largest in the world by market capitalization. Moreover, TSE has a strong global presence and also plays a crucial role in the grander Asian financial market.

# Conclusion

In a nutshell, these five exchanges play a crucial role for both retail and institutional investors looking to diversify away from the US. Nevertheless, it is challenging to examine these exchanges one by one to determine which is the best fit for you.

 
![VXUS ETF (ETF Insider web-app)](/uploads/twitter_url_size_VXUS_a99de8f5fc.png)

Fortunately, there are now sophisticated portfolio management tools such as ETF Insider that help us analyze and properly allocate international ETFs such as the Vanguard Total International Stock ETF ($VXUS). Hence, helping us to avoid common investor pitfalls such as over and under-diversification, overexposure, and even fund overlaps.

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There are now sophisticated portfolio management tools such as ETF Insider that help us analyze and properly allocate international ETFs.

Non-US Stock Exchanges in the World

Most companies and ETFs are still down compared to their highs in early (January) last year. If you have been investing since then, there is a good chance some or even all of your portfolio is in the red. So the question remains, is it better to buy even more or cut your losses?

Before we proceed, let's first define what is "averaging down" in the first place. Simply put, averaging down is purchasing additional shares of a stock or ETF when its price has declined after you originally bought it. In essence, this helps lower your average share cost, potentially setting you up for a more significant profit when the price recovers since your total average cost has, quite literally, averaged down.

For illustration, let’s say you bought ten shares of stock $A last year at $100. However, because the market has gone down, the current market price is now at $90. If you decide to "average down" now and buy an additional 100 shares at $90, then this brings down your average cost for stock A to $95 from $100.

As you can imagine, this is great if stock A recovers and go up in price months or years from now (as long as you're still holding it). Regardless, this also presents a massive financial risk. Thus, in this article, we will explore five crucial factors you must consider before deciding to average down on your stocks and ETFs.

## 1. Fundamentals
First and foremost, before averaging down, it's essential to reevaluate the fundamentals of the company or ETF you are considering. For a stock, some of the most important fundamental metrics are its financial health, competitive position (how it compares to its peers), and overall growth prospects.

For ETFs, it's important to reassess their underlying holdings and how the ETF compares to other ETFs in the same industry. If the fundamentals remain strong or, in fact, have not changed, averaging down might be a viable option. However, if you discover that the fundamentals have weakened, it might be best to reconsider.

## 2. Market Condition
Second, the overall market condition plays a huge role in why the stock or ETF may be down. For example, during economic and market downturns or bear markets, even high-quality stocks and ETFs may experience a significant decline. In such cases, averaging down could be a reasonable strategy (especially if you have identified in point #1 that their fundamentals have not changed).

However, if the stock or ETF is underperforming in a bull market or when compared to its peers, it could signal underlying issues that you need to take a look at.

![NASDAQ Holdings (ETF Insider web-app)](/uploads/bar_qqq_a327ddedbc.png)

## 3. Company/Industry Outlook
Third, after considering the fundamentals and market condition, it is equally important to look at the long-term outlook of the company or industry represented by the ETF. Are there factors suggesting strong growth potential despite the drop in value? Or is the drop reflecting a less favorable future?

If the company or industry remains to have a positive outlook and can, in fact, capitalize on future growth opportunities, averaging down may present a good opportunity to accumulate shares at a "bargain." On the other hand, if the outlook is less favorable or uncertain, it might be better to avoid averaging down and look for other investment options/vehicles (see the next point why).

## 4. Opportunity Cost
In relation to #3, remember that when you choose to average down, you are technically allocating more of your investment capital to a stock or ETF that has been going down in value. As such, it's essential to weigh the opportunity cost of not investing that capital elsewhere.

Ask yourself, are there other long-term investment opportunities available that could potentially offer more attractive returns that are within your investment objective?

## 5. Emotional Factors
Last but not least, a common pitfall of averaging down is the desire to "get even" with a losing investment, which can cloud your rational judgment. Hence, many investors do not even consider looking at the first four points of this article and just buy even more to double down on their investments. In finance, this is called a "sunk-cost bias," which is our tendency to hold on and pour more into something we've invested money, effort, or time, despite the current costs outweighing the benefits.

Remember that investment decisions should be made objectively, not emotionally. If your decision to average down is driven by emotion, don't hit the buy button until you can do your due diligence. Ask yourself if you would invest in the same asset at its current price if you didn't already own it. If the answer is no, then averaging down is not the right move, and you might be experiencing a sunk cost bias.

# Conclusion
At the end of the day, averaging down is a risk that you have to weigh before pros and cons before implementing. By considering these five key points, you will be in a better position to decide whether you should or should not average down on your portfolio.

Fortunately, there are now intuitive and sophisticated portfolio management tools, such as ETF Insider, that can help you build a resilient and well-diversified investment portfolio that can weather the ups and downs of the market over a long period of time and ensure that you are on the right track of your investing journey.

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By considering these five key points, you will be in a better position to decide whether you should or should not average down on your portfolio.

Key Things to Consider Before Averaging Down

When choosing possible investment options in the stock market, there are a plethora of metrics that investors and analysts alike may consider before deciding which stock or investment funds (mutual funds, exchange-traded funds, etc.) to invest in. However, with so many metrics, it is easy to underestimate and gloss over the "vital few."

Hence, in this article, we'll explore this question and take a closer look at perhaps one of the crucial metrics successful investors (including Warren Buffet!) and analysts utilize to assess stocks and investment funds.

**What is Earnings-Per-Share ([EPS](https://etfinsider.co/analysis-quote/eps))?**

First and foremost, it is essential to understand what EPS is in the first place. For starters, EPS is derived by dividing a company's total profit by its common stock's outstanding number of shares. In other words, it is the amount of money the company earns for each share of its stock. Hence, EPS is a fundamental metric for evaluating a company's financial health as well as how profitable of an investment it actually is for you.

With this out of the way, let's delve deeper into five key reasons why EPS is one of the most important market metrics:

## 1. A direct reflection of a company's profitability

The most glaring reason EPS is an excellent metric is that it directly reflects a company's profitability. Essentially, it tells investors (you) how much money a company makes for each share you hold. So if a company has a high EPS, it generally means it generates attractive returns for its shareholders and that the company is doing well financially.

## 2. Helps Determine the company's "intrinsic" value

When evaluating a company, investors will often look at its EPS to decide whether or not it is undervalued or overvalued. For example, if a company has a high EPS relative to other companies in its industry, then it is generally considered to be "undervalued," as it generates much profit for its shareholders, but its stock price has yet to catch up to its true value. On the other hand, a company with a relatively low EPS may be considered overvalued compared to its peers.

This is one of the biggest reasons why Warren Buffet himself prioritizes looking at EPS over most metrics, as it helps him identify "cheap" stocks with massive potential/upside.

## 3. Helps compare companies within the same industry objectively

This is because EPS provides a standardized (apples-to-apples) measure of profitability that can be used to compare companies of different sizes within the same industry. So, if an investor is considering investing in two companies in the same industry, they can quickly glance over the EPS of each company to determine which one is more profitable.

![twitter url size.png](/uploads/twitter_url_size_f02d98d0e3.png)

## 4. Amazing progress tracker of financial performance

EPS is also used to track a company's financial performance over time. Investors can see how well the company has historically performed by looking at a company's EPS over several years (and even decades). For example, if a company's EPS is consistently increasing, it is a good sign that the company is growing and becoming more profitable and cost-efficient. On the other hand, if a company's EPS is consistently decreasing, it may be a sign that it is struggling financially.

## 5. Widely Used in the Investment Industry

Lastly, one of the reasons why this metric stood out from the rest is its prominence in the investment industry. When evaluating a company, it is best practice to look at EPS to help determine whether the stock or a fund is a sound investment base on your goals. So if a company has a high EPS and is forecasted to continue growing, it may be considered an attractive investment. On the other hand, if a company has a low EPS and is predicted to continue struggling in the future, it may not be favorably viewed.

## Conclusion

At the end of the day, despite the crucial role of EPS in investment decision-making, it is not enough to make a sound conclusion based only on one metric. In fact, complementing it with other relevant metrics will give EPS a more thorough meaning. Fortunately, there are now sophisticated data visualization and portfolio management tools such as ETF Insider available for us to take advantage of in helping us better understand the complete picture of a particular investment fund. Thus, making it more intuitive and insightful to do your due diligence.

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Take a look at perhaps one of the crucial metrics successful investors including Warren Buffet! and analysts utilize to assess stocks and investment funds.

EPS is Important Stock Market Metrics

As the world continues to embrace remarkable technological advancements, particularly in Artificial Intelligence (AI), it's essential for us investors to stay ahead of the curve and capitalize on this rapidly growing industry. One way to best do this is by investing in leading AI Exchange Traded Funds (ETFs). In a nutshell, an AI ETF is a fund that invests in companies involved in developing and applying AI technology. Moreover, because of the inherently higher risk associated with these companies, these ETFs provide investors with exposure to a diverse range of companies in the AI sector, reducing the risk associated with investing in individual stocks.

In this list, we compiled five of the best-performing AI ETFs this year for you to take a look at:

![Best AI ETF 2.jpg](/uploads/Best_AI_ETF_2_66cc25aecd.jpg)

## 1.Global X Robotics & Artificial Intelligence ETF ($BOTZ)

Year-to-Date (YTD) return: 15.97%
First on our list, [BOTZ](https://etfinsider.co/analysis-quote/botz) invests in companies involved in the development and production of robots, autonomous vehicles, and AI technologies. In addition, the fund also provides exposure to a diversified portfolio of companies operating in the AI space, including tech giants like Amazon and Alphabet.

## 2. First Trust AI Global Equity ETF ($AIEQ)

Year-to-Date (YTD) return: 11.37%
Like BOTZ, [AIEQ](https://etfinsider.co/analysis-quote/aieq) also invests in global companies that are involved in the development and application of AI technology. Furthermore, the fund also provides exposure to a well-diversified portfolio of AI companies, including leaders in the field like Microsoft and Nvidia.

## 3. ARK Innovation ETF ($ARKK)

Year-to-Date (YTD) return: 29.46%
Perhaps the most well-known in this list, [ARKK](https://etfinsider.co/analysis-quote/arkk) invests in disruptive innovation across multiple industries, including AI, genomics, and the "internet of things." Just remember that ARKK is a high-risk, high-reward option for investors looking for aggressive exposure to cutting-edge companies in the AI space.

## 4. iShares Exponential Technologies ETF ($XT)

Year-to-Date (YTD) return: 11.02%
Next on our list, if you are looking to invest in a fund that puts sustainability at its core, this fund might be perfect for you. [XT](https://etfinsider.co/analysis-quote/xt) invests in companies that are driving exponential growth in industries such as AI, biotechnology, and renewable energy. [XT](https://etfinsider.co/analysis-quote/xt) offers investors broad exposure to the most promising, innovative, and sustainability-centric companies in the AI sector.

## 5. Innovation Shares NextGen Protocol ETF ($KOIN)

Year-to-Date (YTD) return: 8.52%
Last but not least, [KOIN](https://etfinsider.co/analysis-quote/koin) invests in companies shaping technology's future through blockchain, AI, and other emerging technologies. Likewise, KOIN provides investors with exposure to a well-diversified portfolio of companies at the forefront of technological innovation.
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ETFs provide investors with exposure to a diverse range of companies in the AI sector, reducing the risk associated with investing in individual stocks.

Five of the Best AI ETFs to invest in 2023

Perhaps you may be conflicted with this question and are looking for a guide to help you out, or maybe you have already decided but are wondering if you made the right investment decisions.

Well, choosing what and how many investments to hold at any given time is no short of a delicate task, and if we add the complexities of different asset classes, there is to consider; welp! That certainly seems like complicated work to do!

Hence, we came up with a short guide to hopefully help you out by giving you a general context and objectives for the three long-term investing timeframes below.

Timeframes:

## 1.5 Years and Below

Objective: Take Advantage of a Bullish Market Cycle
Suggested Number of Asset Class: 1 (Equities)
Investments to Consider: Stocks, ETFs
First on our list is our shortest time frame. Being the shortest time frame, more than likely, investors are looking to capitalize on a bullish market cycle. Hence, we suggest focusing on equities (stocks and ETFs), particularly high-growth and tech stocks and ETFs, as they tend to perform best during bullish market cycles.

## 2. 10 to 20 Years

Objective: Resilient Long-term Capital Appreciation
Suggested Number of Asset Classes: 2 (Equities and Fixed Income)
Investments to Consider: Stocks, ETFs, Bonds
Next on our list is where most long-term investors classify their investment horizons. In addition to equities, we also suggest holding a fixed-income security or ETF to build a resilient portfolio. This is because, during this longer-term horizon, it is normal to experience multiple market cycles. Historically, fixed-income securities served as a "hedge" during market downturns. Thus, providing the "resiliency" factor in your portfolio.

![Investments and Asset 2.jpg](/uploads/Investments_and_Asset_2_df641b0def.jpg)

## 3. 20 Years and Beyond

Objective: For a Comfortable Retirement
Suggested Number of Asset Classes: 3 (Equities, Fixed Income, and Money Market Instruments
Investments to Consider: Stocks, ETFs, Bonds, and Money Market Fund
Last but definitely not least, if your horizon is more than 20 years, then more than likely, you are aiming to build your retirement fund. We suggest gradually adding a money market fund or ETF into your portfolio mix to lessen your risk, as these securities tend to be on the lower end of the spectrum in terms of risk and return.
The goal here is when you are nearing your retirement age, your exposure to risky assets needs to be reduced, as any significant market fluctuation can have a detrimental effect on your overall portfolio. Hence we suggest prioritizing protecting your portfolio.
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Perhaps you may be conflicted with this question and are looking for a guide to help you out, or maybe you have already decided but are wondering if you made the right investment decisions.

Short Guide: How Many Investments and Asset Classes to Hold on Different Timeframes (5, 10, and 20 years) [T]

In the field of finance, two vital areas that dictate the course and phase of action of many private and public institutions are traditional economic theory and behavioral economics/finance (where personal finance falls under). In this regard, James J. Choi, a notable finance professor at Yale University, examined the top 50 most famous personal finance books in 2019 to compare and contrast the two disciplines.
Yes, these personal finance books include best-selling pieces such as Robert Kiyosaki's Rich Dad Poor Dad, Ramit Sethi's I Will Teach You to Be Rich, Jesse Mecham's You Need a Budget, and of course, numerous book publications by Dave Ramsay's. Choi then likened the overarching tenets of these books to the principles of traditional economic theories.
The US National Bureau of Economic Research then published the by-products of his findings. In summary, the five comparisons he made are the following:

## Economic Theory vs. Personal Finance



## Making Sense of The Difference

The primary distinction lies in the discipline each one pursues. The traditional economic theory concentrates on objectiveness — a segment that strives to learn the most appropriate course of action for each financial and economic challenge using observable universal truths and logical measures. A highly regarded example is the "supply and demand model."
Above, we can see that the market theory endorses prioritizing the highest-interest debts first, regardless of the obligation size. This is undoubtedly a sound mathematical decision as it would yield you paying off your obligations in the most cost-efficient manner. However, this action step assumes you will be objective all throughout the repayment duration and not once waver.
For that reason, it does not account for our human tendencies, which personal finance takes into significant consideration as most individuals are more likely to get momentum and keep paying off their debts when they take the most manageable course of action — paying off their least debt first. Why? Well, this is primarily because human behavior (especially our emotions) and psychology are the crucial focus of behavioral economics/finance and, by extension, personal finance.
Understanding this provides substantial financial insights about our society. In addition, examples comprise purchasing patterns and tendencies/biases that consumer companies consider—appealing to dopamine receptors of social media users for Advertising Giants such as Meta and Twitter to foster their advertisement revenue by employing tactics that keep you scrolling and hooked.

## A Similar Perspective

Interestingly, one category is identical among the five categories — the mutual fund section. Why? This is because, time and time again, history has demonstrated that the straightforward index-following fund outperforms more than 90% of all mutual funds/ETFs.
Moreover, since a fund manager is not actively managing the fund, across-the-board fees are cheaper as management fees are out of the equation. Thus, instead of pushing to "beat the market returns," it is easier as well as cost-efficient to pick an index fund while arguably providing historically best-in-class consistent returns.



## The Bottom-line

In a way, behavioral finance/economics and economic theory are like comparing Social Science and Mathematics. Unsurprisingly, issues that both domains could solve can deliver different solutions. One aims to solve it in the most objective and rational way, while the other one takes into account that humans are creatures of emotions and, thus, we are often not logical.
The truth is that both are crucial and valuable to our overall economic system. But, more importantly, it is frequently difficult or nearly impossible to adapt landmark economic theories because of our irrational nature. We are not robots with no emotions and no innate biases. Therefore, learning why and how we do things is of utmost importance.

## The Bright Future Ahead of Us

Nevertheless, throughout history, we have demonstrated to be species that improve, learn, and adapt from our mistakes. Hence, we may one day line up our response just like in the "mutual funds" category. In fact, we are now seeing this with the introduction of sophisticated data visualization tools like ETF Insider, where you can precisely pinpoint fund overlaps and overexposure and identify specific key information about managed funds which ultimately helps us to pursue the "objectively best course of action" that economic theories propose while simultaneously preserving our humanity.

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In the field of finance, two vital areas that dictate the course and phase of action of many private and public institutions are traditional economic theory and behavioral economics/finance (where personal finance falls under). In this regard, James J. Choi, a notable finance professor at Yale University, examined the top 50 most famous personal finance books in 2019 to compare and contrast the two disciplines.

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