ETF investment strategies emphasize simplicity and diversification awareness

Investors are advised to adopt a ‘keep it simple, stupid’ (KISS) approach to investing by utilizing one to three exchange-traded funds (ETFs) to achieve liquidity, diversification, and market returns. A set-and-forget strategy involving broad-access ETFs can simplify the process, provided investors perform quarterly rebalancing to maintain their target asset mix.

However, caution is necessary regarding perceived diversification. Holding multiple ETFs, such as a global ETF, an S&P 500 ETF, and a total U.S. market ETF, can create a false sense of security. Because these funds often share major holdings, a portfolio split across them may result in heavy concentration in a few large-cap companies. For example, an equal weight split between certain Vanguard funds can result in over 15% of the total portfolio depending on just three companies: Nvidia, Apple, and Microsoft.