ETFs and Diversification
Ninad RamdasiCategories: DSIJ_Magazine_Web, DSIJMagazine_App, Letters to Editor, MF - Letter to Editor, Mutual Fund
Analysing your special report in the last edition, I wanted to know the diversification benefits of ETFs.
Analysing your special report in the last edition, I wanted to know the diversification benefits of ETFs. - Sarthi Kumar
Editor Responds : Thank you for writing. ETFs are baskets of securities that trade like stocks on an exchange. They can track a wide range of assets, including stocks, bonds, commodities, and currencies. One of the key benefits of ETFs is that they offer diversification. By investing in an ETF, you are essentially investing in a basket of securities, which can help to reduce your risk. For example, an ETF that tracks the S&P 500 index will invest in 500 of the largest publicly traded companies in the United States. If one of those companies performs poorly, the overall impact on your portfolio will be relatively small. Of course, no investment is without risk. ETFs are subject to market volatility, which means that their prices can go up and down. However, the diversification and transparency that ETFs offer can help to make them a relatively stable investment choice.