As the stock market develops, new technologies such as blockchain, robotics, artificial intelligence (AI), machine learning (ML), and data analytics are becoming more popular. Using these methods, algorithms can track trends with the stock data which leads to the creation of a stack that baskets together groups of stocks based on the themes in the data. They focus on the companies’ fundamentals and their growth potential, among several other parameters, to generate a single basket of stocks and ETFs.
Stacks are collections of stocks & ETFs (exchange-traded funds) that you can invest in. These are often developed by hedge funds, global asset management companies, experienced wealth management firms and portfolio managers. Many apps allow you to explore pre-created stacks as well as create your own based on your investing goals. Essentially, they are based on a theme or an idea such as specific industries or even just one technology.
The advantage of stacks is that it reduces the risk that comes with diversification because of the focus on investing in themes. Often-times, these stacks are put together by professionals and with a lot of thought, meaning that they hold a higher degree of safety in comparison to decisions made by yourself. Basically, you won't have to do the hard work of research yourself and easily diversify your portfolio.
One of the thumb rules in any investment principle is reviewing and rebalancing your holdings to create the best portfolio that takes advantage of the market's position in the moment With Stacks, the baskets are actively and consistently rebalanced to ensure alignment with goals through technology, which relieves work that the investor has to do.
To sum it up, stacks are a great investing opportunity to look into if you want to quickly diversify your portfolio without lots of risk.
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