How can I diversify $7k across ETFs and stocks?
You don't really have a lot of money, and that isn't a criticism as much as that you are limited to diversification.  For example, I would estimate you can only have one or two stocks for a buy-write scheme.  Secondly you may be only to buy one fund with a high minimum investment, and a second fund with a smaller minimum investment.  Thirdly there is not a whole lot of money to make a large difference. One options might be to look at iShares since your are with Fidelity.  Trading those are commission free and the minimum investment is one share.  They offer many sector funds. Since you were in a CD ladder you might be looking for stability of principle.  If so you can look at USMV and PFF.  If you can tolerate a little more volatility DGRO. Having said that you seem interested in doing some buy-writes.  Why not mix and match?  Pick a stock, like INTC (for example not a recommendation), and buy-write with half the money and some combination of iShares for the rest. An index fund is inherently diversified across its index -- no one stock will either make or break the results. In that case it's a matter of picking the index(es) you want to put the money into. ETFs do permit smaller initial purchases, which would let you do a reasonable mix of sectors. (That seems to be the one advantage of ETFs over traditional funds...?) "You may want to look into robo-investors like Wealthfront and Betterment. There are many others, just search for ""robo investor""." When you are starting out using a balanced fund can be quite advantageous. A balanced fund is represents a diversified portfolio in single fund. The primary advantage of using a balanced fund is that with it being a single fund it is easier to meet the initial investment minimum.  Later once you have enough to transition to a portfolio of diversified funds you would sell the fund and buy the portfolio. With a custom portfolio, you will be better able to target your risk level and you might also be able to use lower cost funds.  The other item to check is do any of the funds that you might be interested in for the diversified portfolio have lower initial investment option if you can commit to adding money on a specified basis (assuming that you are able to). Also there might be an ETF version of a mutual fund and for those the initial investment amount is just the share price. The one thing to be aware of is make sure that you can buy enough shares that you can rebalance (holding a single share makes it hard to sell some gain when rebalancing). I would stay away from individual stocks until you have a much larger portfolio, assuming that you want to invest with a diversified portfolio. The reason being that it takes a lot more money to create a diversified portfolio out of individual stocks since you have to buy whole shares. With a mutual fund or ETF, your underlying ownership of can be fractional with no issue as each fund share is going to map into a fraction of the various companies held and with mutual funds you can buy fractional shares of the fund itself.
VaR does not capture overall risk, it allows you to say a statement, based on our model, K% of the time, losses will not exceed X.  The problem is,   1. How accurate is the statement out of sample?  2. What is the marginal value of this number? Are the choices I make better or worse?  3. Even with a 99.999% confidence level what is the cost to the organization if a decision is made when the model is wrong?  Personally when running multiple strategies, you always need to factor in model risk in your asset allocation/trading, i.e. either shut down or reduce exposure when assumptions are violated or run something else, for example when correlations between strategies increases, it is logical to downsize exposure to those strategies as the risk factor to equity has increased.  1. in the grand context of a bank/financial institution, if the VaR is wrong we can bankrupt or negative, so we may want to diversify revenue streams by avoiding that risk, for example correlations increase across asset classes.  2. Sizing is a key problem for banks, as the question is does model error across various platforms (FI, EQ, FICC, Transactions etc), happen at the same time? "I'd suggest you start by looking at the mutual fund and/or ETF options available via your bank, and see if they have any low-cost funds that invest in high-risk sectors.  You can increase your risk (and potential returns) by allocating your assets to riskier sectors rather than by picking individual stocks, and you'll be less likely to make an avoidable mistake. It is possible to do as you suggest and pick individual stocks, but by doing so you may be taking on more risk than you suspect, even unnecessary risk.  For instance, if you decide to buy stock in Company A, you know you're taking a risk by investing in just one company.  However, without a lot of work and financial expertise, you may not be able to assess how much risk you're taking by investing in Company A specifically, as opposed to Company B.  Even if you know that investing in individual stocks is risky, it can be very hard to know how risky those particular individual stocks are, compared to other alternatives. This is doubly true if the investment involves actions more exotic than simply buying and holding an asset like a stock.  For instance, you could definitely get plenty of risk by investing in commercial real estate development or complicated options contracts; but a certain amount of work and expertise is required to even understand how to do that, and there is a greater likelihood that you will slip up and make a costly mistake that negates any extra gain, even if the investment itself might have been sound for someone with experience in that area.  In other words, you want your risk to really be the risk of the investment, not the ""personal"" risk that you'll make a mistake in a complicated scheme and lose money because you didn't know what you were doing.  (If you do have some expertise in more exotic investments, then maybe you could go this route, but I think most people -- including me -- don't.) On the other hand, you can find mutual funds or ETFs that invest in large economic sectors that are high-risk, but because the investment is diversified within that sector, you need only compare the risk of the sectors.  For instance, emerging markets are usually considered one of the highest-risk sectors.  But if you restrict your choice to low-cost emerging-market index funds, they are unlikely to differ drastically in risk (at any rate, far less than individual companies).  This eliminates the problem mentioned above: when you choose to invest in Emerging Markets Index Fund A, you don't need to worry as much about whether Emerging Markets Index Fund B might have been less risky; most of the risk is in the choice to invest in the emerging markets sector in the first place, and differences between comparable funds in that sector are small by comparison.  You could do the same with other targeted sectors that can produce high returns; for instance, there are mutual funds and ETFs that invest specifically in technology stocks. So you could begin by exploring the mutual funds and ETFs available via your existing investment bank, or poke around on Morningstar.  Fees will still matter no matter what sector you're in, so pay attention to those.  But you can probably find a way to take an aggressive risk position without getting bogged down in the details of individual companies.  Also, this will be less work than trying something more exotic, so you're less likely to make a costly mistake due to not understanding the complexities of what you're investing in." diversifying; but isn't that what mutual funds already do? They diversify and reduce stock-specific risk by moving from individual stocks to many stocks, but you can diversify even further by selecting different fund types (e.g. large-cal, small-cap, fixed- income (bond) funds, international, etc.).  Your target-date fund probably includes a few different types already, and will automatically reallocate to less risky investments as you get close to the target date. I would look at the fees of different types of funds, and compare them to the historical returns of those funds.  You can also use things like morningstar and other ratings as guides, but they are generally very large buckets and may not be much help distinguishing between individual funds. So to answer the question, yes you can diversify further - and probably get better returns (and lower fees) that a target-date fund.  The question is - is it worth your time and effort to do so?  You're obviously comfortable investing for the long-term, so you might get some benefit by spending a little time looking for different funds to increase your diversification. Note that ETFs don't really diversify any differently than mutual funds, they are just a different mechanism to invest in funds, and allow different trading strategies (trading during the day, derivatives, selling short, etc.). "Depends on how far down the market is heading, how certain you are that it is going that way, when you think it will fall, and how risk-averse you are.  By ""better"" I will assume you are trying to make the most money with this information that you can given your available capital. If you are very certain, the way that makes the most money for the least investment from the options you provided is a put.  If you can borrow some money to buy even more puts, you will make even more.  Use your knowledge of how far and when the market will fall to determine which put is optimal at today's prices.  But remember that if the market stays flat or goes up you lose everything you put in and may owe extra to your creditor.  A short position in a futures contract is also an easy way to get extreme leverage.  The extremity of the leverage will depend on how much margin is required.  Futures trade in large denominations, so think about how much you are able to put to risk. The inverse ETFs are less risky and offer less reward than the derivative contracts above.  The levered one has twice the risk and something like twice the reward.  You can buy those without a margin account in a regular cash brokerage, so they are easier in that respect and the transactions cost will likely be lower. Directly short selling an ETF or stock is another option that is reasonably accessible and only moderately risky.  On par with the inverse ETFs." "There are probably 3-4 questions here.  Diversification - A good index, a low cost S&P fund or ETF can serve you very well. If you add an extended market index or just go with ""Total market"", that might be it for your stock allocation. I've seen people with 5 funds, and it didn't take much analysis to see the overlap was so significant, that the extra 4 funds added little, and 2 of the 5 would have been it. If you diversify by buying more ETFs or funds, be sure to see what they contain.  If you can go back in time, buy Apple, Google, Amazon, etc, and don't sell them. Individual stocks are fun to pick, but unless you put in your homework, are tough to succeed at. You need to be right at the buy side, and again to know if, and when, to sell. I bought Apple, for example, long ago, pre-last few splits. But, using responsible a approach, I sold a bit each time it doubled. Has I kept it all through the splits, I'd have $1M+ instead of the current $200K or so of stock. Can you tell which companies now have that kind of potential for the future?  The S&P has been just about double digit over 60 years. The average managed fund will lag the S&P over time, many will be combined with other funds or just close. Even with huge survivor bias, managed funds can't beat the index over time, on average. Aside from a small portion of stocks I've picked, I'm happy to get S&P less .02% in my 401(k). In aggregate, people actually do far worse due to horrific timing and some odd thing, called emotions." You may want to move money between your investments within the plan, rebalancing money to maintain your diversification. You don't have to deal with the details if selling and buying, just tell them how much to move where. Many plans offer investments that automatically rebalance for you such as Target Date accounts. You may be able to select one of those and just ignore the 401k until retirement, or at most rebalance even less often. Look at what's offered, look at what it costs as fees, run the numbers and decide whether you can do better. "If you are making that much, don't waste your time here. Pay a few hundred bucks for a consultation with a fee-only certified financial planner. (Not one of the ""free"" services, which make their money via commissions on sales and are thus motivated to direct you to whatever gets them the largest commission.) In fact, in your bracket you might want to consider hiring someone to manage your portfolio for you on an ongoing basis. A good one will start by asking what your goals are, over what timeframe, and will help you determine how you feel about risk and volatility. From that information they will be able to suggest a strategic mix of kinds of investments which is balanced for those constraints." ETFs offer the flexibility of stocks while retaining many of the benefits of mutual funds. Since an ETF is an actual fund, it has the diversification of its potentially many underlying securities. You can find ETFs with stocks at various market caps and style categories. You can have bond or mixed ETFs. You can even get ETFs with equal or fundamental weighting. In short, all the variety benefits of mutual funds. ETFs are typically much less expensive than mutual funds both in terms of management fees (expense ratio) and taxable gains. Most of them are not actively managed; instead they follow an index and therefore have a low turnover. A mutual fund may actively trade and, if not balanced with a loss, will generate capital gains that you pay taxes on. An ETF will produce gains only when shifting to keep inline with the index or you yourself sell. As a reminder: while expense ratio always matters, capital gains and dividends don't matter if the ETF or mutual fund is in a tax-advantaged account. ETFs have no load fees. Instead, because you trade it like a stock, you will pay a commission. Commissions are straight, up-front and perfectly clear. Much easier to understand than the various ways funds might charge you. There are no account minimums to entry with ETFs, but you will need to buy complete shares. Only a few places allow partial shares. It is generally harder to dollar-cost average into an ETF with regular automated investments. Also, like trading stocks, you can do those fancy things like selling short, buying on margin, options, etc. And you can pay attention to the price fluctuations throughout the day if you really want to. Things to make you pause: if you buy (no-load) mutual funds through the parent company, you'll get them at no commission. Many brokerages have No Transaction Fee (NTF) agreements with companies so that you can buy many funds for free. Still look out for that expense ratio though (which is probably paying for that NTF advantage). As sort of a middle ground: index funds can have very low expense ratios, track the same index as an ETF, can be tax-efficient or tax-managed, free to purchase, easy to dollar-cost average and easier to automate/understand. Further reading: