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Markets moved higher last week as stocks and bonds continue to bounce back in 2023.
So far, stocks have increased more than 6% and bonds more than 2% in the first three months of the year. Part of that rally came in March, when stocks and bonds each climbed more than 2%.
Looking ahead, April is Financial Literacy Month, and to celebrate, we’re going back to the basics. Over the next few weeks, we’ll be covering everything you need to know to start and stay invested — beginning with the importance of diversification.
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| Don’t put all your eggs in one basket |
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Diversification is the process of spreading your investments across different types of assets (like stocks and bonds), industries (like technology and energy), and regions (like U.S. and emerging markets).
With diversification, you get a little exposure to a lot of different investments, so you’re not relying on the performance of just one thing. If one type of asset goes down, another could be going up.
Sounds simple in theory, but in practice, it can be a headache to pick and choose investments yourself in order to diversify your portfolio.
Fortunately, there are exchange-traded funds (ETFs) that can make diversification easy. |
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Explain it like I’m 5: Think of the ETFs in your Acorns portfolio like a grocery cart. You fill your cart up with everything you need for the week — it’s rarely just Hot Pockets and Lucky Charms. There are fruits, vegetables, and everything else you need for a balanced diet.
Now imagine you no longer have to write your grocery list. Instead, a nutritionist tells you what foods to buy. It’d be a lot easier for you (and probably a bit healthier, too).
That's effectively what you can get with many ETFs. ETFs simply track the “balanced diet” of investments — guided by seasoned professionals.
Depending on the ETF, you can get a mix of stocks, bonds, commodities, or even real estate in your cart. Take the widely followed SPY ETF. Investing in just this one ETF gives your portfolio exposure to all 500 companies of the S&P 500 — some technology, some financial, some energy, and much more.
That way, if one company or sector experiences a dip, the other investments in the ETF can help balance your portfolio out — just like your grocery cart if the store runs out of your favorite peanut butter. You’ll have plenty of other food from your list to rely on.
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| Diversification made easy |
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Holding different types of assets with an ETF can be an easy way for hungry investors to balance their diet (...er, portfolio).
Finding the right ETF for you is simple with Acorns. Tell us about your goals and objectives, and we’ll recommend a diversified portfolio of ETFs fit for your financial journey and investment profile.
There are a few reasons why our expert-built portfolios contain ETFs.
- When you hold multiple ETFs with exposure to different assets and sectors — like the ones found in your Acorns portfolio — you may be able to enjoy the potential benefits of diversification.
- While you can get similar benefits from mutual funds, mutual funds will generally have higher fees. ETFs tend to be a cheaper way to diversify.
Hey Terry, have any questions for our Chief Investment Officer, Seth Wunder? Let us know what's on your mind! |
| Get started with Acorns Invest! Invest daily, weekly, or monthly in a portfolio recommended for you. |
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Market commentary provided by Seth Wunder (Chief Investment Officer)
Contributors to this week’s newsletter: Casey Hollis (Managing Editor), Caelon Smith (Investment Data Analyst), Trevir Nath (Senior Writer), Emily Gadd (Associate Editor), and Adam Grason (Senior Brand Designer). |
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