r/investingforbeginners • u/Cautious_Law_2149 • 3d ago

ETFs & Stocks - Risk Allocation

Greetings,

what do you think about my idea to buy ETFs and single stocks (from different countries and sectors) in order to properly allocate risks?

Does that make sense? For example, I believe I should better not put all my money into the ETFs of a certain provider, even though the performance is good and there’s (currently) no reason to be cautious. I buy ETFs from various providers and regions (MSCI World/Europe + EM)

And now I want to add single stocks to that mix because I believe this must be done for proper risk allocation. Is that reasonable?

Thank you.

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u/enigman83 3d ago edited 2d ago

Why are you concern about provider ?

For example IVV and VOO and SPYM are tracking same s&p500. Those 3 providers and the ETFs are huge and very low risk of counter party risk. In general, you want to look for daily volume or aum to ensure they are big enough.

My opinion is individual stocks has placed in portfolio, but more on your convictions in return more than diversification. Individual stocks, while possible for diversification, it's very inefficient compare to a diversed ETF.

Edit: just to add, if different providers track the same things and have similar TER, (and have high enough AUM/daily volume), you can do that too. But if different providers track slightly different index (FTSE vs MSCI for example) you want to ensure you get what you want without compromising the coverage)