By tadamichi @ Shutterstock.com
What happens when everyone is invested in the same stuff? When you look at the S&P 500 and compare it to, say, target maturity funds or a total stock market index, there’s a ton of overlap.
Just when investors think they’re diversifying, a simple look under the hood shows most engines running on the same stuff. That’s not necessarily bad, but let’s not confuse it with diversification. What is a great disservice to the average investor is they read the names of their funds and feel like they are diversified. “Hey, it’s the S&P 500,” they think. “That should be good diversification.” But do they realize it’s market-cap-weighted? Can you blame them for thinking that they are diversified? With a busy life between work and family, who’s got time to spend on this stuff?
Action Line: Lucky for you, there’s me. I care about your success. Let’s talk about it if you’re serious.
Originally posted on Your Survival Guy.
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