How many ETFs should I invest in?
Thinking about how many ETFs you should have in your portfolio? Learn how your goals, risk tolerance and asset mix can help shape the right investment portfolio for you.
Exchange-traded funds (ETFs) offer a simple and low-cost way to invest in hundreds or even thousands of shares or bonds1.
If you're using them to build a portfolio, you may be wondering how many you should have. Just like deciding how many funds you need in your portfolio, there’s no single right number of ETFs to hold. A good rule of thumb is to start with your goal and work from there.
Start with your goal
First, think about what you're investing for, whether that's retirement, a house deposit or building up savings for the future.
Your goal can help you decide how much risk to take.
Investments that carry more risk can offer higher long-term returns, but they can also experience bigger falls in value.
If your goal is many years away, you may be able to take more risk because you have longer to recover from setbacks.
If you need the money sooner, a lower-risk approach may be more suitable.
Decide what your portfolio needs
The amount of risk you're comfortable taking will help determine your mix of shares and bonds.
Equity ETFs invest in company shares and offer greater growth potential, but their value can rise and fall more sharply.
Bond ETFs typically experience smaller ups and downs, although their long-term growth potential is usually lower.
The balance of shares and bonds in your portfolio can have a big impact on your long-term returns. Find out how to build a balanced portfolio that’s right for you.
Understand each ETF
Once you've decided on your mix of shares and bonds, look at where different ETFs invest and how diversified they are.
A single global equity ETF may provide all the exposure you need to shares. Or you may want additional exposure to areas such as smaller companies or emerging markets.
The same applies to bonds. One may be enough, or you may use different bond funds for different purposes. Government bond funds are typically lower risk, while corporate bond funds may offer higher income but can be more sensitive to economic conditions.
Avoid overlap
Before buying another ETF, check that it adds something different. A global equity ETF may already give you exposure to thousands of companies worldwide. Another fund, such as a US equity ETF, could leave you owning more of the same companies, as the US already makes up a large share of global markets.
Know when enough is enough
Ultimately, like any fund, there's no ideal number of ETFs to invest in. You have enough when your portfolio gives you the exposure you need to meet your goals. Adding more ETFs can increase complexity, and potentially costs, without necessarily improving diversification.
For some investors, one broadly diversified ETF may be enough. Others may combine several to tailor their portfolio.
The aim is to own enough to match your goals and risk level, but no more.
Learn more about our global ETF range.
1 Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
Investment risk information
Investing gives your money the opportunity to grow over time, but market movements mean values can rise and fall along the way.
ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing.
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