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Questions tagged [diversification]

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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How do I model the diversification benefit of adding something to my portfolio?

Question How can I quantify the marginal diversification benefit of adding a particular holding to a portfolio? Context In this question, I asked about manually replicating a world-tracker ETF by ...
SuperElectric's user avatar
4 votes
1 answer
744 views

Does a portfolio of low beta stocks, small stocks or value stocks still outperform the market?

I am new to investing. Currently I'm trying to read about it as much as possible. There is one question that bothers me quite much that I cannot find an answer to, so I decided to ask here. There is a ...
yaskovdev's user avatar
  • 161
0 votes
2 answers
157 views

Comprehensive Investment Strategies: Does Going Beyond S&P 500 ETFs Pay Off?

I am intrigued by investment strategies beyond S&P 500 ETFs. How significant is the impact of elements such as international stock ETFs, bond ETFs, real estate ETFs, commodity ETFs, or additional ...
S. G.'s user avatar
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6 votes
4 answers
2k views

What is the point of portfolio diversification?

I am looking for intuition here. I understand that diversification decreases the variance of the portfolio. However, what I am confused is that it also effectively decreases the return. Assume I have ...
Medan's user avatar
  • 553
-1 votes
1 answer
156 views

What happens if an Index Fund sell off occurs?

For example, if you have a 3-fund portfolio of the Fidelity Total Market Index Fund, Fidelity International Index Fund, and the Fidelity Total Bond Fund, does this strategy represent "meta" ...
w21froster's user avatar
1 vote
0 answers
69 views

As a EU citizen, are there any low-effort diversification options that could protect me against inflation or a local crisis?

The recent political events in the EU and in my own country (Poland) led me to reconsider my current saving scheme and I'm looking for a low-effort way to diversify what I have in order to better ...
d33tah's user avatar
  • 197
2 votes
2 answers
420 views

How should I decide how much of a down payment to put on a home?

How should I decide how much of a down payment to put on a home? Should it be a percentage of my assets? Paying 20% down on the largest house I qualified for would require selling 74% of my liquid ...
anonymouse's user avatar
2 votes
1 answer
77 views

Does the transfer of an investor's Legal & General fund to Fidelity reduce diversification?

I live in the UK, and over the years have put savings into funds with several different institutions with a view to diversification to reduce risk. Two of these institutions are Legal & General ...
Adam Bailey's user avatar
1 vote
1 answer
120 views

Should a person sell all/some/none of the stock they receive when their former employer goes public

Consider a person with the following financial situation: An annual income in the 150-250 thousand $/year range Savings in the 250-750 thousand $ range (invested in Vanguard ETFs, for example) A ...
Adrian's user avatar
  • 113
1 vote
2 answers
799 views

How best to maximise the compounding effect of vanguard investing platform?

I have recently put 2K into the vanguard life strategy 100% fund, which is a pre diversified fund of funds. I also drip feed this account monthly. Now I’m putting another 2K from savings into vanguard ...
CiaranWelsh's user avatar
1 vote
2 answers
97 views

Diversifying inter sector or intra sectors. What should be considered?

I have been investing (softly) in stocks for the last 2 years or so. I am not an experienced stock investor but it seems to me that there is a consensus that some degree of diversification is a safer ...
Celso Bessa's user avatar
31 votes
9 answers
5k views

Why are cryptocurrencies not considered proper investments?

I plan to invest a portion of my savings in cryptocurrencies that I understand on a technical level (e.g. Bitcoin and Ethereum). However, otherwise prudent financial advice articles on the internet ...
user102086's user avatar
  • 1,242
0 votes
0 answers
52 views

In what ratio should I buy options to preserve the diversification effect of the underlying stock portfolio?

I want to invest in a certain stock portfolio using long down-and-out barrier options. But I am not sure in what ratio to buy the barrier options to retain the same exposure to the volatility of the ...
twhale's user avatar
  • 101
0 votes
1 answer
165 views

Calculation of YTD return in case of portfolio rebalance

I want to calculate a couple of metrics for portfolio. However, only examples I can find over the internet do not cover portfolio rebalances. Suppose the following scenario: Jan 1st, buy portfolio ...
Rahul's user avatar
  • 103
2 votes
2 answers
321 views

Looking for a single ETF for maximum diversification [closed]

Around 5 years ago I started investing my savings by individually picking stocks with the intention of holding them. So basically Buy & Hold strategy mainly focusing on companies that pay dividend,...
D1X's user avatar
  • 271
1 vote
3 answers
234 views

Advice: Diversify my retirement investments with a Roth IRA

I am new to investing, and also late to the game (34 yrs old), so I'm trying to make the most financially intelligent decisions I can. I'm starting a Roth IRA at the moment, and funding it with this ...
peterchic's user avatar
  • 111
2 votes
3 answers
140 views

What is the mechanism behind stocks correlation?

Stocks are VERY correlated. This is obvious when looking at an index: most stocks chart match peaks and valleys. What I would like to know is the mechanism behind those correlations? Is it "buy ...
Robert Brax's user avatar
1 vote
2 answers
91 views

Trying to understand diversification in market indexes

I have read an article in morningstar telling that Euro Stoxx 50 provides a good degree of diversification. This surprises me, my understanding is that the S&P 500 is well diversified, how can an ...
Martel's user avatar
  • 1,281
0 votes
3 answers
171 views

Diversification in mutual funds and ETFs

I'm trying to undertand deversification in mutual funds, specially in contrast with having your own stocks. Mutual funds and ETFs that track some index (S&P, DJIA...) are diversified by ...
Martel's user avatar
  • 1,281
0 votes
2 answers
127 views

How do I properly allocate capital into the different stocks I own?

Late last year (Aug. 2018), I started building a portfolio of stocks using fundamental analysis and management analysis. The portfolio is mainly built around high-income, dividend-paying companies ...
JC Betana's user avatar
5 votes
2 answers
2k views

Is it risky to move from broad geographical diversification into investing mostly in less developed markets?

I currently invest in a handful of index funds that includes U.S. equities, U.K. equities, some emerging markets, and some Asian equities. But I have in mind that the West is eyeball deep in debt, ...
matewilk's user avatar
  • 876
0 votes
2 answers
111 views

If you own a portfolio of five stocks and want to diversify, which would you be least likely to recommend? [closed]

Gill, Madura. Personal Finance, 4th Canadian Edition 2019. p 323. Emboldenings are mine. Lee Ann would like to diversify her individual stock with other investments. Currently, she owns a ...
user avatar
2 votes
1 answer
138 views

Which of these ETFs would reduce my diversifiable risk?

ETF1 and ETF2, within the same sector, have a high Sortino ratio together. Swapping ETF2 with ETF3, a well-performing ETF that has diverse holdings (rather than holding stocks within the same ...
Zesty's user avatar
  • 625
1 vote
2 answers
252 views

How to pick ETFs that hedge against stock market crashes?

If I want to hedge against a stock market crash the advice I often see is “diversify” and “buy bonds.” As a result, my portfolio is primarily Vanguard VTI and Vanguard BLV, the total stock market ...
Allyl Isocyanate's user avatar
1 vote
1 answer
218 views

How to improve geographical diversification?

Recently realised on my investments' geo distribution map that they are largely (~83%) in NA/EU. Given this, should I diversify by region further? What kind of ETFs/funds in general avoid NA/EU? ...
Razor's user avatar
  • 113
5 votes
1 answer
249 views

How to diversify across P2P lending platforms?

In the UK there are plenty of peer to peer lending platforms, certainly 20+. Most offer returns of around 5% but a small handful offer above 10%. As far as I'm aware, in the US there are only a small ...
F Chopin's user avatar
  • 183
0 votes
1 answer
205 views

CAT & ILS Bonds/funds [closed]

I'm constructing an portfolio with the objective to diversify as much as possible. I would like to include securities that are uncorrelated with the financial markets. The last few days I've been ...
Kalle Anus Kanin's user avatar
2 votes
3 answers
619 views

What is the "definition" of a "diversified" portfolio and why a diversified portfolio is better?

A short version of my question - What is the "true" definition of a diversified portfolio and why is it better? A long version of my question - Regarding portfolio diversification, people ...
B Chen's user avatar
  • 1,029
2 votes
2 answers
233 views

Am I confused about how to diversify into bonds?

I held several Vanguard equity ETFs (VFIAX, etc.) I wanted to diversify into bonds (as discussed in "A Random Walk Down Wall Street"), so I sold some of them and bought BLV. As stocks have declined, ...
Ken - Enough about Monica's user avatar
1 vote
3 answers
179 views

Do international index funds provide diversification to domestic USA index fund?

Let's examine two exemplary passive index funds. One is international and one is USA domestic. SCHF: Schwab International Equity ETF SPY: SPDR® S&P 500 ETF Does the international index ...
JoJo's user avatar
  • 672
2 votes
3 answers
137 views

How do I diversify with little capital but picking only those companies I want?

Is it possible to achieve a high degree of diversification with relatively little capital but still be able to determine exactly in which companies one invests and in which one not? So is there a way ...
andreas's user avatar
  • 153
0 votes
6 answers
510 views

What, if any asset classes, were contrarily correlated during crash of 2008

This is a meta question about diversification, and if it truly exists for passive investors. i.e. Investors investing in 401ks, IRAs, Roths, primarily using ETFs or fund with large pool of stocks. ...
paulj's user avatar
  • 1,157
2 votes
3 answers
270 views

Is is good/bad to invest in too many mutual funds at a time?

I am currently investing in 12 mutual funds. 10 out of them are through SIP. Just to make it clear, SIP (Systematic Investment Plan) means buying units of mutual fund each month (or quarterly/yearly) ...
Aastik's user avatar
  • 727
4 votes
1 answer
700 views

Does it make sense to invest in multiple index funds?

The UK based investor here. I haven't found anything under "Multiple index funds" search criteria thus decided to give it a go, if there is already a similar question/answer would love to get a link. ...
matewilk's user avatar
  • 876
3 votes
3 answers
452 views

Diversification in practice: Choosing a couple of index funds (UK)

I am a newbie investor and just've opened my first trading account although haven't invested in anything yet. I want to invest solely in index funds. In the book "A Random Walk Down Wall Street" at ...
matewilk's user avatar
  • 876
3 votes
4 answers
169 views

Is adjusting my portfolio's distribution according to bad signals from news risky?

I'm distributing my investment to stock(mostly MSCI ACWI) and bond funds, Basically 60:40. I also rebalance monthly as I got paid monthly. I recently worried about the global and local(South Korea) ...
user2652379's user avatar
5 votes
1 answer
310 views

Should I diversify? If so, into what?

I am 29 years old. I worked very hard at a well-paying (but not exciting) job and spent my vacation time buying and renovating properties. Currently, I have 4 condos with an approximate equity of 445,...
Faust's user avatar
  • 153
2 votes
0 answers
147 views

Reduce risk of the unexpected on a long-term portfolio

I've been thinking recently what can I do to reduce risk on my long-term buy-and-hold portfolio. When I say "risk", I'm talking about rare, unexpected but highly destructive events (think Taleb's ...
Alexander's user avatar
  • 187
1 vote
2 answers
202 views

How far should I go in trying to diversify my portfolio?

I have determined the following ratio for the Equity portion of my investments: 30%: Intl Equity 40%: US large cap 30%: US small and mid cap Now, I have some funds invested in a S&P 500 Index ...
user65003's user avatar
4 votes
1 answer
943 views

Building an ETF portfolio: Is it even possible to diversify?

I want to start investing my money. I've decided to invest a monthly fixed amount by buying ETFs. I am currently investigating different ETFs to decide on what my portfolio allocation will look like. ...
VictorOnline's user avatar
51 votes
10 answers
17k views

One of my stock positions has grown substantially. Should I rebalance my portfolio?

I'm a small beginner investor with less than 50k portfolio. One stock I hold has grown substantially than everything else and makes up 46% of my portfolio, but it is expected to keep growing and has ...
Andrew Welch's user avatar
1 vote
2 answers
157 views

How to allocate alternative assets?

I'm doing diversification with stocks and bonds. Basically 60%:40%. But when I'm trying to add alternative assets(like gold or REITs) or high-risk high-return bonds(like Brazil bonds), I'm not sure ...
user2652379's user avatar
3 votes
2 answers
8k views

How to use full margin (Robinhood Gold) while staying diverse

How is one able to add diversity to one's Robinhood portfolio while utilizing near 100% of Gold (margin)? I was told in my previous post, as well as reiterated by a Robinhood Rep, that when making a ...
Dustin's user avatar
  • 741
15 votes
2 answers
2k views

Are REITs more correlated with the stock market or the real estate market?

Suppose a person has a sizable portion of his networth in stocks. He wants to diversify his wealth into the real estate asset class. For the sake of correct diversification, it will be nice to know ...
curious's user avatar
  • 2,175
2 votes
1 answer
136 views

Diversify your ETF portfolio from your job in the financial industry

I currently have 50% ZAG.TO, 35% XAW.TO, 15% VCN.TO. My current compensation at work is highly correlated to the performance of the financial industry in Canada (i.e. the top 5 banks). XAW holds 10% ...
Ryan J. Shrott's user avatar
3 votes
3 answers
300 views

I opened my Roth IRA account. Does it makes sense to diversify my initial contribution of $5500?

This is my first Roth IRA. I am putting $5500 which is the maximum annual contribution I can make. I was planning to apply the 3 fund portfolio technique by investing this money proportionately in ...
Snigdha's user avatar
  • 31
1 vote
3 answers
322 views

Is there any advantage in holding international mutual funds, even if they don't outperform domestic equities? [closed]

I've heard that, overall, international funds don't perform as well as other mutual funds, such as small, mid, or large cap mutual funds that hold domestic U.S. equities. Is this true? If so, are ...
AverageWorker's user avatar
0 votes
1 answer
103 views

Diversification for large bond investments

I do all my investments with four index funds, and I currently have a fairly aggressive approach with 20% in a bond ETF (AGG) and 80% in three equity ETFs. As I get older, I'll put more money in ...
minou's user avatar
  • 7,536
2 votes
2 answers
725 views

Diversify across multiple brokers?

Right now my brokerage account has a non-trivial fraction of my total assets. It's all in a single account with Interactive Brokers. I know in theory customer funds and assets are ring-fenced, but ...
ggambetta's user avatar
  • 593
1 vote
2 answers
150 views

Trade? Buy and hold? Or both? [closed]

I am now taking control of my own investments. While I've made a few in the past, including one very good and one very bad, I really don't have a clue. So I attended an intro class by a trading school ...
Habah's user avatar
  • 13