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By Scott Burns | 01-28-2010 04:56 PM

ETFs: More Arrows in the Quiver for Your Portfolio

Rick Ferri, founder of Portfolio Solutions and the author of 'The ETF Book,' on how to think about and use ETFs in the portfolio building process.

Scott Burns: Tips for building your ETF portfolio. Hi there. I'm Scott Burns, director of ETF analysis. Today I am joined by Rick Ferri, the founder of Portfolio Solutions and the author of "The ETF Book." Rick thanks for joining me.

Rick Ferri: Thank you Scott.

Burns: I thought we would take some time today to talk about building portfolios. You know, you work for Portfolio Solutions. You manage around just under a billion dollars in assets. And I know you are a veteran of the conference circuit. People want to hear what you say.

Let's talk a little bit about just the basics of portfolio construction. Where should somebody begin?

Ferri: Well, at the very beginning of portfolio construction is investment policy. Forget about how the asset allocation is and what funds you should buy.

Before you even get to that point, the beginning, right at the beginning, is going to be, "What is the money for? What is the duration of the money? When are you going to need it? Are you putting money in? Are you taking money out?"

And so, investment policy is right at the beginning before you even get into portfolio construction.

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