buying lots of etfs

[stockmarketbeginner]

Hello,

I see a lot of nice ETFs. I don't see the harm in buying 8 or maybe even 20 of them, rather than putting it all in the S&P 500.

If the ETFs are reasonably distributed across geographies, value, growth, small cap, large cap, add in a few sectors of interest that are doing well... what is the cautionary tale here?

As you buy more and more stocks, your risk shifts from ideosyncratic to systemic. It seems that something similar would apply to fund diversification.

 

[tommcginnis]

A lot of what you state as premise holds the ring of Popular Truth.

In reality, though, diversifying your *holdings* does not mean that you've diversified your *account.*

Make a graph, or a Pearson's r table, and make sure that your thinking (at least) comports with history.

(And good luck!)

(Oh, and another thing: I have seen etfs lately (last 2-3 years) that do not appear to be following their announced aim. In particular, "name brand" funds that are supposed to "follow" the SPX, and doing 30%+ annual. ...Supposed to be following the NDX that are likewise beating that one. Who's going to bitch if they're beating to the upside?? Nobody. But you hate to think about how they're doing it, within the range of operating statements covered in their prospectuses prospectii prospecticals. There's trouble brewing -- if not heartbreak, there, with these "too good to be true" results. Something to keep in mind...)