More investments. Or more of the same?
Why a longer list of holdings does not always mean a broader spread of risk.
In this guide
Diversification is about spreading exposure, not simply counting how many investments you hold.
Look beneath the labels.
Diversification spreads money across investments to help manage risk. That can involve different types of assets, as well as different companies and industries within an asset class. [1]
Different funds can own similar things.
A mutual fund or ETF may offer access to many holdings, but a narrowly focused fund is not automatically diversified. Several funds can also overlap. Read their holdings and objectives to understand what you actually own.
A tool for risk, not a guarantee.
Your time horizon and ability to tolerate losses matter when choosing an allocation. Diversification does not make investing risk-free. A portfolio can still fall in value.