How Many ETFs Do You Need? Why 5 Can Be Less Diversified Than 1 (Explained by a Banker)
Philipp 7:35 Episode 6 of Money Decisions
How Many ETFs Do You Need? Why 5 Can Be Less Diversified Than 1 (Explained by a Banker)
How many ETFs do you actually need? Fewer than most people hold. An S&P 500 fund and a world fund sound like different things, yet nine of their ten largest positions are the same company. A banker walks through the test that decides whether a fund earns its place — and the honest limit on the other side.
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How Many ETFs Do You Actually Need?
Diversification comes from what your funds hold, not from how many you own. An S&P 500 fund and a world fund sound like different things, yet nine of their ten largest positions are the same company, so stacking them adds admin rather than protection. A second fund earns its place only when it does a job the first one cannot: a different region, a different asset class, or a different slice of the market. Most of the benefit of spreading risk is collected long before you reach fifty companies, which is why one to three broad funds is not a compromise but the point.
Full article, with the sources and the numbers →
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