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Four ETFs to Put in Your Toolbox

These exchange-traded funds can help your portfolio if used correctly.

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As financial advisors and both institutional and individual investors have embraced exchange-traded funds (ETFs) with increasing enthusiasm in recent years, we've often played the part of the worrywart. We've pointed out how easy it is for investors to shoot themselves in the foot by trading too much, racking up transaction costs, and betting on narrowly focused funds. Despite those misgivings, we really do like some ETFs.

ETFs do offer investors powerful alternatives in categories where there aren't many affordable mutual fund choices with good records. Other ETFs offer stiff competition to traditional core equity and fixed-income funds. Fund families such as Fidelity, E*Trade (ET), and USAA recently acknowledged as much by cutting their index fund fees.

In this column, we'll look at four useful ETFs. None of them get unqualified endorsements--they all have their risks and caveats. And, as always, investors need to make sure ETFs make sense from a cost perspective and fit in their overall investment program before using them. The following ETFs, however, have utility.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.