Re: Idiot wants advice.
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"Better diversified" needs some defining. Studies have shown that once you've got more than 20 stocks in your portfolio, you're pretty far down the road to total diversification. After 30 or so the incremental diversification really falls off.
5000 is probably better diversified than 500 in an absolute sense, but I wouldn't worry too much about diversifying away 99.999% of risk over 99.99%. It doesn't really make a difference, and for the extremely casual investor its easy to flip over to CNBC or whatever and see what the S&P did.
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We're probably in more agreement than disagreement, but it's all a continuum. If 30 stocks gives you adequate diversification, you'd be just as happy owning the ETF that tracks the Dow Jones as you would be owning the S&P 500 tracking stock. I'm simply saying that diversification is very good thing for someone who plans to buy and hold, ignoring any day-to-day news. Absent a belief that large-cap stocks are a better value than small-cap stocks, VTI gives you better diversification than SPY. I don't disagree with the idea that the increase in diversification from 500->5000 is lower than the increase from 5->30.
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