The effectiveness of data visualization in optimizing the diversification of ETF portfolios

Exchange-traded funds (ETFs) have significantly changed the financial markets since their introduction in 1993, now they account for up to 30% of daily U.S. trading volumes. While ETFs have advantages like lower fees and diversified exposure, they also present challenges in terms of investor understanding due to their complex structure. This research seeks to find out how data visualization techniques can improve the optimization of the diversification of ETF portfolios through the improvement of investor comprehension. More specifically, the study will look into how well various interactive visualization tools like tree maps, pie charts, and heatmaps can help explain the composition of ETFs. By combining the empirical analysis and user experience surveys, this research aims to identify which visualization tools significantly help investor decision-making. The study compares interactive data visualization (IDV) with traditional non-IDV such as tables, to determine whether interactive tools improve understanding and willingness to diversify. In order to create a user-friendly data visualization tool that shows portfolios and increases the effectiveness of investment decisions. By bridging the gap in the literature regarding the impact of data visualization techniques on understanding ETF investments, this research contributes valuable knowledge of the data comprehension of complex financial information to the fields of financial management and data visualization.