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Is investing in an ETF a good strategy to gain broad exposure to early stage trends?

By Matt McCall

ETFs have exploded in popularity in recent years. They’re easy to invest in, give you instant diversification and can be highly focused. I was an early adopter of ETFs and have invested in them for myself and my clients.

Diversification is smart. It’s very important to not put too much of you money in any one stock. At the same time, you don’t want to put your money in bad stocks, and that’s what can happen with an ETF.

You are forced to buy every single stock in that ETF, and at that point it becomes over diversification. You’re stuck owning all of the laggards that will inevitably weigh on your returns.

There’s a better way to do this when it comes to investing in early stage companies. Our exhaustive research and analysis is designed to point us to the companies best positioned to become big winners, so we’re better off buying a basket of the top three or four companies, which still spreads out our risk but increases the likelihood that we’ll get at least one home run out of the deal – and perhaps even more.

So in a sense, we’re building our own ETF.

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