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by winston » Tue Sep 25, 2018 10:21 am
How to Properly Diversify Your Portfolio
1. Invest Globally
2. Invest Across Asset Classes
3. Determine Your Geographical Allocation
a. 50% of the stock allocation into U.S. stocks (50% world's market cap)
b. 25% into Developed Countries in Europe, Australia, Asia and the Far East
c. 25% into emerging markets, China, India etc.
4. Diversify within the geographical asset class
by winston » Thu Apr 25, 2019 8:08 am
Once 25 stocks are owned, active investors pretty much capture all the benefits of diversification. That’s assuming the stocks in the portfolio are selected randomly. Obviously, 25 tech stocks isn’t going to cut it.
by winston » Wed Sep 25, 2019 6:27 pm
1. Use asset allocation or target date funds.
2. Invest in a mix of mutual funds or ETFs.
3. Customize with individual stocks and bonds.
4. Vary company size and type.
5. Invest abroad.
6. Add complexity.
by winston » Mon Aug 17, 2020 2:32 pm
by winston » Tue Mar 28, 2023 8:44 am
it's quite all right to ignore even the most-repeated financial advice if it doesn't feel right, which she herself does when it comes to the phrase "diversify."
“I put all my money in the real estate basket, my brokerage firm, and everything in there went to buying properties.”
Corcoran goes on to explain that since she knows real estate well, she chose to focus her investments there rather than diversifying them.
by winston » Tue Jul 25, 2023 8:15 pm
1. Diworseification = Overdiversification
2. Ignoring Correlations
3. Becoming Too Dependent On Diversification & Ignoring Other Factors
by winston » Wed Aug 09, 2023 10:56 am
A small group of 159 stocks produced half of the world's stock-market wealth.
More than 55% of U.S. stocks in the group had compound returns lower than that of the risk-free one-month Treasury bill over 31 years.
Only 1,526 stocks — or 2.4% of companies — accounted for all of the wealth created in the 1990-2020 period.
by winston » Wed Oct 11, 2023 1:40 pm
If the traditional 60/40 portfolio is meant to be a portfolio diversifier, it's not working.
Recent analysis from Bloomberg shows the correlation between the iShares 20+ Year Treasury Bond ETF (TLT) and the SPDR S&P 500 ETF Trust (SPY) hasn't been this high since 2005.
A stronger-than-expected economy is reacting better than expected to tight monetary policy.
The recent rout in both stocks and bonds is a sign investors should be more diversified, bonds included. She suggests something more like a 50/30/20 where the 20% is in alternatives like gold or private credit.
by winston » Wed Mar 20, 2024 9:18 am
Strong performance in the US stock markets, with the S&P 500 and Nasdaq up around 28% and 40%, respectively.
Investors should know that keeping portfolios limited to the Magnificent 7 is risky. This set of stocks is significantly undiversified, with all of them being domiciled in the US and being tech-heavy equities — this is three full strikes of being undiversified in geography, sector and asset class. That poses a significant risk.
Europe’s market is diverse and focuses more on value than the tech-heavy US market. European companies generate significant revenues outside the bloc and can boast of industry leaders in some key sectors, such as semiconductors or defense, that can be extremely important in the rapidly fragmenting global economy.
European equities trade at a significant discount to their US counterparts, with the Euro Stoxx 600 currently trading at a P/E of 14 times as against the S&P 500’s at 24 times.
China’s economy is facing structural issues unlikely to be resolved by band-aid measures such as rate cuts, macroeconomic stimulus, or market interventions. With debt concerns at hand, it is unlikely that Chinese authorities will announce a big-bang stimulus package.
by winston » Thu Jun 27, 2024 5:56 pm
Sir John Templeton once said that “the only investors who shouldn’t diversify are those who are right 100% of the time.”
Diversification may mean you limit your upside. But you also limit your risk. And – when done correctly – you eliminate the ultimate risk of being “wiped out.”
If not making more money from diversification is the biggest risk, sign me up any day.
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