Boost Your Portfolio! 3 Proven Strategies to Supercharge Investment Diversity!
Boost Your Portfolio! 3 Proven Strategies to Super
Nama.Cohen
Nama Cohen is a highly experienced professional with over 20 years of experience in the finance industry. She has a deep understanding of corporate finance and global-macro research, which she leverages to provide valuable insights to her clients. Nama is an accomplished buy-side trader who has a proven track record of generating significant returns for her clients.
Feb 08 2023
Everyone tells you to spread the investment portfolio. to spread between risky and non-risky instruments which is, in simple words, between stocks and bonds; spread between stocks of strong companies and smaller stocks; Spread between government bonds and corporate bonds, between index and shekel bonds.
The more dispersion the better. So it's not, although, for most of you, the spread will suit. And how does this contradiction work out?
The big disadvantage of the dispersion
Diversifying your asset portfolio turns your asset portfolio into a kind of benchmark, a kind of portfolio that follows an index. If you invest in 10 securities that each have a weight of 10%, you are very dependent on each of these securities for better or for worse. You can make a lot and lose a lot depending on 10 stocks-bonds. But if you invest in 1,000 securities, a single paper has no meaning. Suppose you believed that a certain company would solve the problem of traffic jams and invested in it? So what? Even if its value doubles or triples, it will be swallowed up in the investment portfolio.
The more you spread, the more your return will converge to the average. Want to be average? It's fine for most of the public, just don't expect impressive returns. The great success of the stock market for generations are those who chose focus rather than dispersion. Most of the investment guru Warren Buffett's portfolio is invested in individual stocks, Apple today is over 30% of Berkshire Hathaway's investments under his control. Those who know how to analyze-follow-evaluate, do not need diversification, but should choose the right stocks.
But diversification has an advantage - it reduces risk. If out of the 10 stocks-bonds in the example of the non-diversifying investor, five were badly hurt then we would be at a big loss. But if it's 5 stocks-bonds out of 1,000 of the diversified investor, it's not bad.
The majority of the public would prefer diversification because they do not want risk, and correspondingly, the investment avenues through the institutions do not allow for focus. They are required by regulation to have a huge spread in stocks, bonds and more. And that's fine and right - for most of us. But those who understand or think they understand the stock market, by reading reports - should invest themselves.
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
