Diversification good or bad?

[deaddog]

Once upon a time I would only choose mining stocks, like copper, iron ore, energy, lithium.
Most of these are correlated to a degree, there would be times I could sit for weeks without buying.
Also, when mining turned up, I would hit several stocks simultaneously with large size, this a type compensation for being flat for so long.
I became uncomfortable with that method.
Now I'll trade nearly anything that moves with a few exceptions and not only is it more interesting, but it feels better, safer, and has improved returns.

Do you consider yourself diversified?

 

[themickey]

Do you consider yourself diversified?

Yes

 

[themickey]

Yes

Today an example, ASX smacked hard but I'm only feeling a small bump down.
Less 0.5% drawdown. (< Half a percent atm).

 

[deaddog]

Yes

Would other people consider you diversified?

 

[themickey]

Would other people consider you diversified?

Pass.
Prolly not, as I'm long stocks only, but can short via ETF's.

 

[ryanplatt]

Diversification is imperative. Can’t afford to lose everything in one go.

 

[deaddog]

Diversification is imperative. Can’t afford to lose everything in one go.

How much can you afford to lose in one go?

What do you consider overdiversified?

 

[mab81]

While diversification can help you spread risks, I think that you cannot overdo it either as then you will fail to concentrate properly.

 

[engineering]

To quote Darvas

"Diversifying over a large number of stocks leads to only average performance. Since only 3 or 4 will produce big profits the remaining stocks drag the performance down.

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."

In a bear market almost all stocks fall, but some go to ZERO.
And that's not even considering the possibility that the company you're invested in might be the next Wirecard or Crazy Eddie. You don't necessarily have to wait for a bear market to lose everything if you're in a single stock.

I limit the size of the investment I make in any one stock or etf.
It pretty much guarantees that my account won't increase 1000% in a year, but it also protects it from going to zero.

 

[deaddog]

I limit the size of the investment I make in any one stock or etf.
It pretty much guarantees that my account won't increase 1000% in a year, but it also protects it from going to zero.

What is your limit?
Do you rebalance when the limit is exceeded?