In an ETF/Mutual fund and think you’re diversified? Better double check

When talking about investing, we always hear the buzzword “diversification”. It is commonly said that owning one individual stock is often more of a risk then owning multiple stocks. Many investors are taught that if you buy into ETFS/Mutual funds and own a basket of stocks that you will be much better off. Although we agree, this doesn’t mean you shouldn’t dive deeper into what that basket of stocks are and the top ten holdings and the weighting of each. You may find your investments are not nearly as diversified as you may have thought.

For example, take XLC, a Spyder communications fund. XLC has 23% alone in Facebook (Meta) and another 22% in Google. You have two companies that make up nearly half of the performance of this fund. As of February 3rd, 2022, Facebook is down 25% alone, causing a big drop in this fund nearly 4x as much as the broad markets. This doesn’t mean that it is bad fund, but this serves as a great example of how your investments may not be as safe or diversified as they may seem on the surface.

Take this as a friendly reminder that if you are tempted to buy into something, be sure to take a closer look into the holdings before you purchase. If you would like us to review any current holdings or have any unanswered questions, please reach out to schedule a call here.


Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

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Due to various factors, including changing market conditions, information provided by Larry Heller, CFP® or Heller Wealth Management may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such information serves as the receipt of, or a substitute for, personalized advice from Heller Wealth Management.

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