The inherent risks of index investing

Investing in index-linked products and securities is a common strategy, but don't get overexposed.

Summary: Many index funds, exchange-traded funds and actively managed funds have inbuilt concentration risks and are insufficiently diversified. But there are ways to offset the risks by building smarter portfolios.

Key take-out: When building portfolios, index investors need to employ alternative investment styles to offset the risks over exposure to one sector.

Key beneficiaries: General investors. Category: Indexing/ETFs.

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Dr Doug Turek

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