For questions related to diversification in investment portfolios, the practice of investing in multiple assets with the goal of managing risk.

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4
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2answers
80 views

How should I be investing in bonds as part of a diversified portfolio?

I often hear that I should diversify my investment portfolio with X% stocks and Y% bonds, ostensibly to mitigate the risk. My question is what exactly this guidance means in terms of HOW to invest ...
3
votes
4answers
143 views

How to divide investment power between fixed asset and more liquid assets?

My wife and I bought our first home this year. We got a good price and live modestly so our fixed expenses are only about half of our take home income. Due to Canadian mortgage rules we opted to put ...
3
votes
1answer
65 views

How do I invest in emerging markets

I'm a casual investor who is interested in diversifying into emerging markets. I have too much in US equities at the moment. Are there any good websites to research and track good investments in ...
5
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3answers
84 views

Is there any Justification in Diversifying AMONG low-fee mutual index funds of the same index?

I see that there are multiple no-load, low-fee mutual index funds that attempt to track the S&P. Some of these funds do a better job of tracking the index than others. Would it be beneficial at ...
10
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4answers
1k views

Is there data and proof that a diversified portfolio can generate higher returns than the S&P 500 Index?

I wanted to ask a follow up questions to the questions linked below. Why would I want a diversified portfolio, versus throwing my investments into an index fund? I have a personal financial adviser ...
23
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5answers
6k views

If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one?

I have $1000 to invest. I use Scottrade to invest in penny stocks online, they charge $7 to buy a stock and another $7 to sell it ($14 in total). Given the high volatility of these stocks, what tactic ...
5
votes
2answers
91 views

What variety of hedges are there against index funds of U.S. based stocks?

I am a 25 year old investor and I want to build long-term wealth. Right now, I am trying to be tax efficient and am using a buy and hold approach. (My 401k contributions are maxed out each year and ...
10
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2answers
752 views

What is the difference between hedging and diversification? How does each reduce risk?

Hedging and diversification are both used for reducing financial risks, but what are the exact differences between these two?
3
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3answers
128 views

What is the theory behind Rick Van Ness's risk calculation in the video about diversification?

In the video, Rick Van Ness states the following scenario: Stock A has a 7% return with +/- 1% risk Stock B has a 3.5% return with +/- 0.5% risk Stock A and B are perfectly negatively correlated. ...
6
votes
1answer
547 views

How do small cap stocks perform vs. large cap stocks (like Dow constituents) during bear trends?

Does anyone have any good information on how small cap stocks, e.g. < $500M, perform during bear trends and/or recessions in comparison to large cap stocks like the Dow Jones Industrial Average ...
2
votes
3answers
8k views

How should a new investor allocate funds in a Roth IRA?

I started a Roth IRA a little while ago, contributing ~$5,000, and I'd like some guidelines on how I should diversify my investments. Should I invest in stocks or bonds or mutual funds or ETF? What ...
7
votes
2answers
637 views

Is there any real risk in having all mutual funds with the same brokerage?

My retirement accounts (Roth IRA and traditional 401k) are with Fidelity. In the unlikely even that Fidelity goes under, what happens to my money - is it gone? If so, does it make sense from a risk ...
6
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2answers
485 views

Investment time horizon: When is it acceptable to withdraw money from investments?

I have received a windfall of 300K dollars. I am 23, have no debt, college educated. I want to have a mini retirement when I am ~40 years old. I plan on managing a diversified portfolio of index ...
1
vote
4answers
700 views

What is an ideal number of stock positions that I should have in my portfolio?

Is there a certain number of stock positions that one should keep in a portfolio? For example what makes more sense ? Option 1: $10,000 spread among 5 solid stocks, if you find new stock then remove ...
2
votes
1answer
526 views

Are there any online tools to examine asset allocation and portfolio diversification?

Are there any good online tools to examine asset allocation, portfolio diversification? I would be interested in being able to plug in numbers, run scenarios etc. I could build a worksheet in Excel ...
1
vote
1answer
99 views

Any diagramming techniques to help diversify/rebalance a portfolio of investments?

I was thinking about how to diversify a portfolio of investments and started scribbling a few diagrams down. I want to plan a diversified portfolio of stocks/investments so there maybe either a 50/50 ...
0
votes
2answers
356 views

Diversified portfolio return calculation & comparison to return from real estate only?

Here's a sample portfolio. If we assume that he invested $100K in the beginning (2005), is it correct that if he sold his entire portfolio and the end of 2009, he would have received $121,394? ...
4
votes
3answers
259 views

How can I find a high-risk, high-reward investment that is not strongly correlated with the U.S. economy?

I'm looking to add something to my investment portfolio for diversification. Right now, I own mostly a U.S. stock index fund, with a little bit of an international stock index fund, bonds and cash ...
6
votes
2answers
294 views

Stocks vs. High-yield Bonds: Risk-Reward, Taxes?

Assuming one is looking for a fairly high-risk, high-reward investment, what are the advantages and disadvantages of a diversified stock portfolio (e.g. an S&P 500 index fund) vs. a diversifed ...
12
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3answers
168 views

Do I need to own all the funds my target-date funds owns to mimic it?

I just calculated out that investing my Roth IRA in a Lifecycle fund will cost me about $65k more than investing directly in the underlying funds, effectively doubling the expense ratio. And the funds ...
7
votes
2answers
232 views

The Asset Allocation Paradox

I've had this problem stuck in my head for a while and I'd like some help with it. In David Swensen's Unconventional Success, the argument is made that asset allocation is the best way to get a good ...
7
votes
3answers
1k views

I'm 23 and new to investing. How should I diversify my 401(k) based on my plan's choices?

My employer matches 100% of up to 4% of my gross salary. I want to contribute at least what is matched. I'm 23 and have a gross salary of $70k, and I know very little about this. I was hoping someone ...
2
votes
1answer
236 views

Is there such a thing as “over diversification”?

I went to an investment advisor today, and asked him his opinion about splitting my foreign (non NIS/Israei) investments between VTI and VEU. He said that he thinks it's "too diversified", and ...
3
votes
3answers
575 views

“Diversifying” by going Long and Short Simultaneously

I was hoping someone could take a critical eye to an idea i've had. Traditionally it's said that one should diversify across various asset classes and ultimately types to spread the risk out based on ...
8
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2answers
449 views

Should you diversify your ETF investments between companies?

I've found a number of interesting index funds, of which a lot are run by Vanguard. However, since I'm diversifying my investments between index funds, it seems sensible that I'd want to make sure all ...
4
votes
3answers
133 views

How to diversify P2P lending accounts?

I've been interested in peer-to-peer lending for 3-4 years now since I first heard about it with Prosper.com. I've since heard about Lending Club, and this Q/A gave me a lot of insight. In ...
1
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1answer
104 views

Using stock markets in Europe, how can I buy commodities / resources, to diversify my portfolio?

I am in Europe and I would like to differentiate my portfolio in buying resources, such as oil, sulphuric acid, titanium etc. Of course not in material form, but as stocks. How can I achieve this?
7
votes
2answers
282 views

What ways are there to invest in stocks, options, indexes, etc, and where should one start (what funds)?

I have been poking around with investing for a few years now. I have diversified my assets a decent amount, between a home, several IRA's and 401k's, savings and checking accounts, and a little bit of ...
6
votes
3answers
78 views

Including the region where you live in your investment portfolio?

Diversification in an investment portfolio is generally recommended. Can my portfolio benefit from avoiding investment in my local economy? When browsing several US sites for investment advice, they ...
0
votes
1answer
173 views

Why are “random” deposits bad?

The deposits of private investors often consists of random securities, caused by tips of friends, banks and exchange newspapers. It is said that the ratio of risk and return cannot be optimal like ...
8
votes
4answers
262 views

What is the theory behind diversification? Why does it work?

We are told always that diversification in a portfolio is good. "Don't put all your eggs in one basket." But is there mathematical theory behind diversification to back up the advice?