The Stock Market's Biggest Winners Are Hiding a Problem. This Is How I'd Protect My Portfolio.
Concentration has become a serious problem. Here's how to fix it.
Overview
Many investors think that owning more stocks or exchange-traded funds (ETFs) automatically means portfolio diversification.
It may. But it depends entirely on what you're buying. Unfortunately, today's U.S. stock market is as top-heavy and concentrated as it's ever been. Because of that, a lot of portfolios own multiple funds that essentially look the same.
Details
The Vanguard S&P 500 ETF (NYSEMKT: VOO), for example, is a perfectly acceptable choice for the core of your portfolio. But it's not perfect. It's currently got 38% of its assets invested in tech stocks and 37% of its assets invested in the index's top 10 holdings. Even in a fund that owns hundreds of stocks, its performance depends heavily on fewer than 10 companies.
Source
Originally published at www.fool.com.