6 blind spots for index investors

Via Market Watch.

 Here are some corners of the stock and bond markets that you may get too much or too little of in your index fund.

  • Small-Cap Stocks – if you invest in a large cap index like the S&P 500 you will miss the opportunity to invest in smaller companies.
  • Changing International Indexes – one investment firm may consider South Korea an emerging market, another may define it as a developed market.
  • Canadian Stocks – most international index funds son’t consider Canada as part of their foreign index.
  • Small Cap International Stocks – many international  indexes have no exposure to small cap stocks, which may work against you.
  • Chinese Stocks – China limits the ways in which foreigners invest in its companies; read the prospectus carefully.
  • Greece – if your foreign bond index is weighted toward the amount of debt outstanding, you could own too much Greek debt.
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