Money changes hands, often. And new money comes into play, hopefully just as often. Advisors find themselves taking over new accounts, which may come to them in cash, or be liquidated to cash upon arrival to be invested differently. Some cash may become available in accounts upon the maturity of some portfolio investments. And some advisors find themselves disheartened with one manager or single security and yet are unsure of the next potential investment.
Deciding just how to put cash to work is but one important set of an advisor’s due diligence considerations. Deciding when to put it to work is equally important. In volatile markets, the when can be as precarious as a youngster deciding the best time to jump onto a fast-moving merry-go-round. Faced with both the how and the when to invest, and in sometimes a truncated time period, it is easy to understand the stress many advisors face.
Many advisors are turning to index ETFs as a tool to equitize cash quickly, thereby freeing up some time to do the investment and manager due diligence without being left out of the market. The index ETF acts as a low-cost investment placeholder, in this instance, and is likely highly correlated to many of the investments under consideration. In many situations, an index ETF will remain the investment of choice but in the meantime, the money is at work. Used as a temporary tool or a permanent investment vehicle, advisors increasingly use utilizing index ETFs to remain in the game.