It’s Springtime, and the season of eggs are upon us, what with Easter Sunday around the corner there is a new beginning for some. For others, it is time to refresh and regroup with their investments and exchange traded funds (ETFs).
Many things come from eggs, such as ducks and butterflies, as well as less sensory, figurative things such as wealth and new beginnings. ETFs can help get you to this point in your investment life, whether you are starting out or ready to retire, the benefits are many. One of the most important lessons from an investors standpoint, is the diversification factor. Do you still have all of your eggs in one basket?
Diversification offers risk management, that incorporates a wide variety of investments within a portfolio. According to Investopedia, the idea is that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.
Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Securities within a portfolio are diversified when they are not perfectly correlated; for example, areas such as technology and commodities have no relation to one another.
ETFs can help get you to this point because they are a basket of stocks that spread the risk out, and ETF from one sector or asset class can help diversify greatly against another, giving an investor a broad range of diversification. So when you do your spring cleaning in your portfolio, make sure all of your eggs are not sitting in one basket.
Happy Easter from ETF Trends!
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.