do etfs provide diversity 
nearly all etfs provide diversification benefits relative to an individual stock purchase still some etfs are highly concentrated either in the number of different securities they hold or in the weighting of those securities for example a fund that concentrates half of its assets in two or three positions may offer less diversification than a fund with fewer total portfolio constituents but broader asset distribution the bottom lineexchange traded funds represent a cost effective way to gain exposure to a broad basket of securities with a limited budget investors can build a portfolio that holds one many or only etfs instead of buying individual stocks investors buy shares of a fund that targets a representative cross section of the wider market however there are some additional expenses to keep in mind when investing in an etf 