Index funds offer diversification from "summary" of All About Index Funds by Richard A. Ferri
Index funds offer diversification as a key benefit to investors. The concept of diversification is simple: don't put all your eggs in one basket. By spreading investments across a wide range of assets, you reduce the risk of being severely impacted by the poor performance of any single investment. Instead of picking individual stocks or bonds, index funds allow investors to own a slice of the entire market, providing instant diversification. This diversification is achieved through the construction of the index fund itself. Index funds are designed to replicate the performance of a particular index, such as the S&P 500. This index contains a large number of companies from various industries, offering exposure to a diverse range of sectors. By holding a stake in an index fu...
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