How many ETFs Should I Own ?

Figuring out the ideal number of ETFs to own can be a puzzling question when it comes to diversifying your investment portfolio . Diversification is like a secret weapon in the investing world helping to spread the risk and potentially maximize returns . Why is diversifying your portfolio so important you may wonder well it’s not some new idea that popped up recently . It all stems from the good old days of finance and the Modern Portfolio Theory which earned Harry Markowitz a shiny Nobel Prize back in the ’50s . This theory still holds its ground today as a widely accepted approach to managing investment portfolios.

The Importance of Diversification in Investment Portfolios

The main idea behind diversification is pretty straightforward . It’s like the old saying goes “Don’t put all your eggs in one basket” . By combining investments with different characteristics you can significantly reduce the risk of your overall portfolio without sacrificing too much in terms of performance . In other words it’s a way to balance things out and give your investments a better shot at success.