Think you're well-diversified because you own the S&P 500, QQQ, and VUG? You might be surprised to learn that you're essentially tripling down on the same handful of tech giants. In this week's episode, I break down the hidden overlap in popular ETFs and show you how to build true diversification into your portfolio.

There is a common misconception that I see all the time in my clients' portfolios – the illusion of diversification.

Let's start with a quick overview of these three popular ETF's:

- The S&P 500 tracks the largest 500 U.S. companies

- The QQQ follows the Nasdaq-100, focusing on the largest non-financial companies listed on the Nasdaq

- And VUG, the Vanguard Growth ETF, targets U.S. large-cap growth stocks

If you split your money equally between these three ETF's, you're not getting three different investments – you're actually tripling your exposure to the same companies.

True diversification isn't just about owning different funds – it's about exposure to:

1. Different sectors beyond technology

2. Different market caps, including mid and small-cap companies

3. Different geographical regions beyond the U.S.

4. Different asset classes like bonds and real estate

5. Different investment styles, including both growth and value

For a transcript of today's episode, go to:

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To schedule a Discovery Call go to:

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Brian D Muller(AAMS©), Founder, Wealth Advisor

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Takeaways:

• A common misconception is that owning multiple ETFs ensures true diversification, which often is misleading.
• Investors frequently overlook the hidden overlap of major tech stocks within popular ETFs, leading to concentrated risks.
• Geographic diversification is essential; one should balance investments between domestic and international markets.
• A well-rounded portfolio should include a mix of large, mid, and small-cap stocks for optimal growth and reduced risk.
• Investing solely in the S&P 500 does not guarantee market performance, as it is heavily weighted towards large-cap companies.
• True diversification encompasses not only asset class variety but also different investment styles and sectors.