It takes special talents to be able to successfully time the market. I don't have that talent.
Diversification good or bad?
- Thread starter oraclewizard77
- Start date
Thank you for the explanation. I appreciate it.
Well said. Over diversification can just turn the positives of diversification to negatives. We must diversify to a reasonable extent.
It is not easy to try to time the market.
But that is what traders do.
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Exactly;
QQQ + related does much of that for me.................................................................
Diversification works for me.
It does for everyone I suppose. Great risk management way.
Can you expand on that statement?
How diversified? Are your returns better than a well diversified index ETF?
Sometimes investors think that they are diversifying their investments correctly, although in reality they aren't. Diversification is a way to soften the effects of market fluctuations by investing in different sectors, countries, asset classes, etc. Some sectors are often influenced by the same factors, or they tend to move in the same direction within the stock market cycle.
We are now seeing an upturn in cyclical sectors such as consumer goods, manufacturing and financial products. Therefore, an investor who invests in these three sectors will still be subject to strong market fluctuations. Since diversification aims at leveling out market waves, a diversified portfolio of cyclical assets, for example, won't be able to meet this challenge. Therefore it is important to diversify to take into account different industries that aren't too closely related to each other.
The goal of diversification is simple: to reduce portfolio volatility. But what if the investor isn't concerned about this volatility or if he thinks that a particular sector or asset class is expensive? If we look at the issue from this angle, we need to conclude that diversification isn't always beneficial.
By diversifying your portfolio, you indirectly admit that you can't choose the best representatives in the market, which is a wise thing to do if you are a novice investor, and stupid if you are a professional.
We are now seeing an upturn in cyclical sectors such as consumer goods, manufacturing and financial products. Therefore, an investor who invests in these three sectors will still be subject to strong market fluctuations. Since diversification aims at leveling out market waves, a diversified portfolio of cyclical assets, for example, won't be able to meet this challenge. Therefore it is important to diversify to take into account different industries that aren't too closely related to each other.
The goal of diversification is simple: to reduce portfolio volatility. But what if the investor isn't concerned about this volatility or if he thinks that a particular sector or asset class is expensive? If we look at the issue from this angle, we need to conclude that diversification isn't always beneficial.
By diversifying your portfolio, you indirectly admit that you can't choose the best representatives in the market, which is a wise thing to do if you are a novice investor, and stupid if you are a professional.