10 uncorrelated bets is a wonderful thing. The problem is the concept has become so corrupted. Owning X number of highly correlated assets is not diversification no matter how large X is.
When the market reverses , doesn't matter how diversified you are. The market in whole moves in that direction.
%% True l305; in a very narrow diversification; Real Estate market seldom tracks SPY/QQQ......... REITs may or may not; but have fees that may be to high, compared to owner occupied or non Wall Street owned .Thanks
1.Indeed,Diversification maximises returns by investing in different areas and minimise the risk of loss. 2. It is also beneficial to achieve long term financial goals. However, it can prove to be a curse if a person tends to diversify into different stocks in a sector then there is a possibility that he/she might accumulate those stocks whose performance has not been very good. And also one has to pay high transaction and investment fees for multiple holdings.
Diversification is undoubtedly good . Diversification aims to reduce risks and maximise the returns of investors by allocating investments over various financial instruments and industries. One must resort to diversify their investments to balance or off set the loss of one investment from the profit of the other and balances a higher risk with a lower one .It enables you to reach your long term goals. For example – If you are holding stocks of a XYZ company. The employees of the company announce a strike. Now what? Obviously you will incur huge losses till the strike is over or may be for a longer period. However, if your portfolio is diversified, a loss from one stock may be off set from the profit of another . Hence , diversification is always good.
Diversification is developed by advisors, they are not good stock picker(s). A childhood friends mom worked at TD long time ago. She become quite wealthy with only 1 stock. She didn't know who the stock market works. She just bought 1 stock.
Diversification essentially means you strive to be average. For the average person, it is good to be average. If you are an elite trader, why strive to be average? Often, you could end up getting diworsification.
There is no good or bad. It is the risk appetite of the person. Just putting all your money in one place can make you big returns, but you have to watch it very carefully.
...depends on your age, health, responsibilities, etc... you can take more shots when you are young, don't have kids, etc. indeed, no one knows if they will be around 20 years from now. might as well shoot for the stars when you are young. you can always start play it safe when you hit 30 or 40; many of your peers won't even have any savings by that age.