Buying one of those indexes gives you instant diversification and the only investment you really need. Most people who get bitten by the investment bug don t want to stop there, though. And it s easy to add more spice to the total market index. This is another exchange-traded fund, which trades on the Amex. Once you have two funds, the problem becomes as much how to avoid overlap as much as how to accomplish diversification.
Most beginners don t pay enough attention to the overlap.
A health-care fund makes a nice complement to the total market and Nasdaq 100 Trust. One good way to find a fund in a specific category is to use the Fund Screener on MSN MoneyCentral. I came up with just three, headed by the Vanguard fund. That wasn t enough. I figured I had made the search too limited by demanding five years of performance.