How to build a diverse portfolio with zero investing experience whatsoever

Clueless about investing? We've got you covered.

man investing and working from home

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You'll often hear that a diverse investment portfolio could be the ticket to growing wealth. Plus, the more diverse your portfolio, the better protection you buy yourself in the face of market volatility. But assembling a diverse portfolio is easier said than done when you don't know the first thing about picking stocks. The good news, though, is that you don't need to be an expert to put together the right investment mix. All you really need to do is focus on one specific type of investment.

Get broad market exposure without breaking a sweat

Some people build diverse portfolios by researching companies individually and then buying up several dozen individual stocks across a variety of market segments (for example, some tech stocks, some energy stocks, and some healthcare stocks). That's a strategy that may seem overwhelming to you if you have no idea what you're doing. But fear not, because if you don't know much about investing, index funds can come to the rescue -- specifically, S&P 500 index funds. Index funds are passively managed funds whose goal is to perform as well as the market indexes they're associated with. Meanwhile, the S&P 500 is one specific index that's comprised of the 500 largest publicly traded stocks today. The benefit of investing in S&P 500 index funds is that you get immediate diversification without having to do a lot of research. Or, to put it another way, if you buy shares of an S&P 500 index fund, you'll effectively get to own 500 different stocks without actually having to go out and buy every single one. Of course, this isn't to say that S&P 500 index funds carry no risk. When the broad market experiences a crash, the value of your portfolio is apt to decline. But one thing you should know about the S&P 500 is that it has a long history of recovering from downturns and rewarding investors who stick with it for the long haul. As such, if you load up on S&P 500 index funds today and hold them for 20 or 30 years, you might accumulate enough wealth to meet your various financial goals, whether they involve retiring early or buying a second home. Now you may be wondering if there's a downside to buying S&P 500 index funds, and, well, there is. In addition to the general risk that comes with owning stocks, one negative you might grapple with is having no say over your investments. If there's a company that's part of the S&P 500 that you specifically don't want to own because it doesn't align with your values as an investor, well, you unfortunately don't get that choice. But if you can get past that, you may find that S&P 500 index funds do a great job of helping you attain a nice level of diversity in your portfolio. And if you're brand-new to investing or don't have the time or patience to learn more about how to choose stocks, then they're definitely an option worth looking into.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

Electric vehicle such as Tesla being charged at charging station.
International Stock News

Tesla searches for Musk successor: Why this matters

Could Elon get the chainsaw from his own board?

Read more »

customers inside and outside a Microsoft retail store
International Stock News

Microsoft shares earnings report: What's the verdict?

Investors moved the Microsoft share price significantly.

Read more »

Warren Buffett
International Stock News

Countdown to Berkshire's AGM: What do investors expect to hear from Warren Buffett this year?

All eyes will be on Omaha, Nebraska this weekend.

Read more »

A smiling woman holds a Facebook like sign above her head.
International Stock News

Meta surges on blockbuster earnings report

It's a good day to be a Meta investor.

Read more »

A family sits on their couch, eyes glued to the television.
International Stock News

Can Netflix be a $1 trillion company by 2030?

How much more can it grow its subscription base?

Read more »

A man looking at his laptop and thinking.
International Stock News

Stock-split watch: Is Nvidia next?

It was nearly one year ago that Nvidia last split its stock.

Read more »

A man looking at his laptop and thinking.
International Stock News

Here's why Berkshire Hathaway stock is a buy before May 2

Giving Buffett and his team your cash to invest for you is likely to be a solid choice no matter…

Read more »

Robot dab indicating a rocketing ASX share price
International Stock News

For Tesla shares, the future rests on autonomous driving and robotics

Tesla has been under pressure lately, with EV demand dwindling.

Read more »