FYI: Until the 1980s, U.S. households participated in the stock market mostly through undiversified portfolios of directly held stocks. In the decades since, mutual and exchange-traded funds (ETFs) have accounted for a steadily rising share of household stock market exposure.
■This shift has reduced the risk of stock market participation, producing improvements in portfolio performance and investor welfare. Performance is easy to measure. Welfare is trickier. How much is the broad diversification offered by mutual funds worth?
■ We use a utility function—an economic concept that helps us measure the subjective values of different choices—to quantify the investor welfare benefit delivered by diversified funds. The estimate can be interpreted as what investors would need to have been paid to forsake funds for the one-, two-, and three-stock portfolios that predominated before the mid-1980s. We put the figure at more than $700 billion.
Regards,
Ted
https://personal.vanguard.com/pdf/what-is-a-mutual-fund-worth.pdf
