You don't have to pay a fund manager or financial advisor to create a low-cost, diversified portfolio. You can build it yourself in a matter of minutes, often commission-free, using exchange-traded funds.
"It's the greatest deal in financial history," said Matt Hougan, CEO of Inside ETFs, the world's largest exchange-traded fund conference.
For example, an investor could build a portfolio of U.S., international and emerging market stocks, along with U.S. bonds, real estate and commodities, at a total annual cost of 0.09 percent (or 9 basis points) using ETFs and pay no commissions on the trade.
That means an investment of $10,000 in this portfolio would incur $9 per year in management fees.
As an example, while the expense ratio for the Schwab U.S. Broad Market Fund is 3 basis points, a 40 percent weighting to that ETF within the diversified basket of ETFs means an investor is effectively spending 1.2 basis points of their money toward that fund: 40 percent times 3 basis points = 1.2 basis points. (See full portfolio allocation and cost breakdown below in an example using a Schwab brokerage account.)