An ETF provides better diversification than investing in individual company stocks.

Question

Quizplus · Accepted Answer

An ETF (Exchange Traded Fund) is a type of investment fund that holds a diversified portfolio of stocks, bonds, commodities or other assets. By investing in an ETF, an investor can gain exposure to a broad range of securities in a single trade, which provides better diversification than investing in individual company stocks. When investing in individual stocks, there is a higher level of risk because the performance of one company can have a significant impact on the overall portfolio. By investing in an ETF, investors can spread their risk across multiple companies, industries, and regions, which helps to reduce the overall risk of the portfolio.

An ETF Provides Better Diversification Than Investing in Individual Company