Investing in multiple ETFs can create an illusion of diversification while leaving greater risk and unnecessary costs. Different ETFs often hold overlapping stocks, such as Vanguard S&P 500 ETF and iShares Core S&P 500 ETF both tracking the S&P 500 with identical top holdings. Overlapping holdings concentrate risk rather than spreading it.
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SMH vs. SOXX: Which Semiconductor ETF Is Better?