How many ETFs to have in a diversified portfolio?

When considering how many ETFs to include in a well-diversified portfolio, there isn’t a one-size-fits-all answer. It largely depends on your investment goals, risk tolerance, and the market sectors you wish to cover. Generally, a well-diversified portfolio might include a mix of ETFs that cover different asset classes (such as stocks, bonds, and real estate) and geographic regions (such as local, international, and emerging markets).

To determine if there is overlap between ETFs, you can start by examining the holdings of each ETF. Overlap occurs when two or more ETFs hold the same stocks or assets. For example, if you invest in both IOZ (iShares Core S&P/ASX 200 ETF) and A200 (BetaShares Australia 200 ETF), you will find a significant overlap because both ETFs aim to track the performance of the top 200 Australian companies listed on the ASX.

To identify overlapping holdings and avoid redundancy in your investments, you can use several strategies and tools:

1. ETF Provider Fact Sheets and Websites: Most ETF providers publish fact sheets and detailed holdings information on their websites. Review these documents to understand the composition of each ETF.

2. Financial News and Analysis Platforms: Websites like Morningstar, Bloomberg, or Yahoo Finance often provide tools that allow you to compare the holdings and performance of different ETFs.

3. Portfolio Analysis Tools: Some online broker platforms and investment tools offer portfolio analysis features that can help you identify overlap between the ETFs in your portfolio. These tools analyze your portfolio composition and highlight any redundancies.

4. Financial Advisors and Analyst Reports: Consulting with a financial advisor or reading analyst reports can also provide insights into how much overlap exists between your chosen ETFs and whether your portfolio is diversified effectively.

By using the

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Hi Olivia.

Great question. it actually doesn’t matter how many you have – you could have 1 ETF that is a completely diversified portfolio (say DHHF or VDHG as examples), or you could have 10 different ETFs and still not be very well diversified (maybe they’re all technology and AI related for example)

I believe Pearler is working on a tool to make this easier, but to check overlap between ETFs you’ll just have to look at each one and see which countries its invested in and what the top holdings are to compare it with others in your portfolio.

Cheers, Dave