Diversification, or investing in many different companies or industries, helps you reduce risk and spread out your bets 💰
But, finding lots of stocks can be tiresome. . . 😥
Say hello to ETFs! 👋
💡ETFs (Exchange-Traded Funds) = a bundle of stocks that you can buy as one.
For example, let's say you love tech and want to invest in Apple and Google. 🍎
You could just buy these 2 stocks, but you'd be missing out on other great tech companies, like Nvidia (which had a crazy gain in May 2023) 🤖
ETFs come to the rescue! 🦸♀️
They allow you to make one investment that covers many different companies in your industry of interest 💪
By investing in a tech-focused ETF, like QQQ, you can automatically diversify your investment into many different stocks. 🌟
Even if Apple stock has a bad day, maybe Google or Nvidia stock has a fantastic day, balancing out your investment! ⚖️
This way, you don't put all your eggs in one basket. 🥚
If a particular company crashes, it won't affect your investment too heavily because there are other companies in the ETF. 🧺
ETFs aren't limited to industries; they can also be grouped by location, company size or many other factors! 🏥
There are even ETFs that track the entire stock market. 📈
SPY and VOO are both ETFs that track the S&P 500, and therefore the whole market! 🤯
In the last 30 years, the S&P 500 has increased 10% per year on average 💰
So if you had invested in SPY 30 years ago, you would have grown your initial investment by over 16x! 🥳