This Is the Biggest Mistake Too Many Investors Make With an S&P 500 ETF
The Vanguard S&P 500 ETF and comparable funds are effective tools for investors, but these funds aren't as diverse as they seem.
Overview
Newer investors often hear about the virtues of diversification, while others are inclined to wait on stock picking until the foundation of their knowledge (and capital) grows. Those are among the reasons S&P 500 exchange-traded funds (ETFs) are so popular.
So popular that the three largest ETFs are all S&P 500 trackers. That group includes the Vanguard S&P 500 ETF (NYSEMKT: VOO), the world's largest ETF. Another reason this ETF and its peers are so beloved is that some market participants believe these funds are diverse because they hold 506 stocks.
S&P 500 ETFs aren't as diverse as some investors assume. Image source: Getty Images
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Originally published at www.fool.com.