Diversification good or bad?

[murray t turtle]

Then diversification should not make a difference

Then diversification should not make a difference
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No one knows; it is more a case of managing your position than diversification.

That does make diversification easier although not better

Not really relevant as the same goes for all active managers. Can you beat the index or are you better off trading an index ETF?

That possibly makes the trading cost a non factor. Depends on how often you trade. A trader who trades only a few stocks but trades often has higher costs than a long term swing trader.

I can have a single position and move into the market slowly, pyramid my position to a full position as the market moves in my favor.


A smooth equity curve is nice to look at but my goal is protection of capital and superior returns. I feel that the more positions you hold the more you will tend towards average. If I was satisfied with average I would buy SPY.

I have 20 stocks over a 5 portfolios that I manage and feel I'm over diversified.

%%
That;
+ actually SPY tends to be one of the better averages/benchmarks. LOOK how few beat SPY over 10 years...........................................................................................

 

[deaddog]

%%
That;
+ actually SPY tends to be one of the better averages/benchmarks. LOOK how few beat SPY over 10 years...........................................................................................

That is probably more a function of portfolio management rather than diversification.

I do use spy as a benchmark and have been lucky enough to outperform since I changed strategies after the tech wreck.

 

[John_09]

For me diversification is really important. Putting all funds at one place is simply making your account prone to blowing up in a second. So its much better to distribute money in different avenues to keep your earning scope high.

That's true, but people often fail in this part. Many don't take diversification seriously.

 

[deaddog]

How is your well diversified portfolio portfolio doing during this latest melt down?

Has diversification helped?

Portfolio management and market timing have.

 

[Teryc20]

Diversification does help but yes a lot of other things need to be managed well too. Only diversification alone wouldn't help always.

 

[johnny62]

it is always. it is like hedging. it is good for you.

 

[bulls95]

Exactly. Its always a good and safe idea. Spreads your risks.

 

[tradenet]

Exactly. Its always a good and safe idea. Spreads your risks.

However people need to know how much to diversify. Over diversification is bad too.

 

[ironchef]

How is your well diversified portfolio portfolio doing during this latest melt down?

Has diversification helped?

Portfolio management and market timing have.

Very sage post.

In this downturn, everything is correlated and all went down in flame together.

Portfolio Management, what is that? Care to expand on it?

Market timing is a special skill only a few have and I don't so this is a moot point for me.

 

[deaddog]

Very sage post.

In this downturn, everything is correlated and all went down in flame together.

Portfolio Management, what is that? Care to expand on it?

Market timing is a special skill only a few have and I don't so this is a moot point for me.

I have a simple method of portfolio management. I don't hold losing stocks in my portfolio.

So in this downturn as the individual positions hit breakeven or broke a long term trend line they were sold.

Right now I'm ahead of the game, but the way the market is rebounding maybe not for long. I'm ahead 12.5% of where I would have been had I not gone to cash.

Diversifying over a large number of stocks doesn't mitigate risk. In a bear market all stocks fall. The best way to control risk is to have a method of getting out of stocks in a down market. DARVAS