The Impact of Index Investing: A Follow-Up

Re:The Impact of Index Investing: A Follow-Up by arielweisberg on Wednesday May 04, 2016 @01:15PM (#11629850)

Most popular index funds are very diversified. 4000 companies not diversified enough for you? There is research that suggests any 50 companies picked at random will give you quite a bit of diversification.

The real lack of diversity is that it's weighted towards US companies which some people have decided they want and others don't, and apparently it's weighted towards stocks as an asset class as well.

I don't think weighting is the same as lacking diversification, although certainly you are lacking one kind of diversification.

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Re:The Impact of Index Investing: A Follow-Up by iofj on Wednesday May 04, 2016 @01:41PM (#11630074)

I would think that generally one means different things. Specifically, a diversified portfolio would hold stocks and bonds.

Or, if one is of the "stocks don't go up over the long term" persuasion, it means stocks + shorts (for a net market neutral portfolio) and bonds.

So no, popular index funds are not diversified. There are exceptions, of course.

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