By creating multiple paths to success, diversification provides superior returns to our portfolios--and to our lives.
In suburban Connecticut, near where I live, two towns sit next to one another. One is Greenwich, CT, a community known for its upscale homes and shops, as well as its concentration of hedge funds. Just a couple miles south on U.S. Route 1 lies the town of Port Chester, NY, a not-so-upscale community that has become a haven for immigrant groups. Recently, when my wife Margie and I went out to eat, we chose Port Chester.
When we first moved to the area, we were surprised to learn that foodies from New York City flocked to Port Chester, not the affluent communities of Fairfield County, Connecticut. Having lived in the region for nearly a decade, I no longer find that surprising. It's not just the authenticity of the food, but the staggering variety within and across restaurants that brings people to the area. The sheer diversity appeals to most any palate.
We are familiar with the idea of diversification in financial markets. It has been called the only"free lunch" available to investors. By spreading our assets across a variety of markets and strategies, we are able to harvest a broad set of returns. Thus, when some of our investments perform suboptimally, others can bring profit. Our total returns may or may not exceed the returns from a concentrated bet at any point in time,.
Note that diversification is a dynamic, ongoing process, not just a one time selection. When one group of assets has performed well in a portfolio and others haven't, the portfolio's composition loses its balance. By rebalancing the assets--selling some of the winners, buying some of the losers--the diversified investor, in Viskanta's terms, becomes a"contrarian".
Österreich Neuesten Nachrichten, Österreich Schlagzeilen
Similar News:Sie können auch ähnliche Nachrichten wie diese lesen, die wir aus anderen Nachrichtenquellen gesammelt haben.
Cramer Remix: Why Chipotle's downgrade is misguidedJim Cramer explains why worries at the restaurant chain may be off-base.
Weiterlesen »
This May hurt: British politicsTheresa May has revealed she will step down next month. She had the unenviable task of trying to deliver Brexit—which she failed to do—and her successor may fare no better. t_wainwright discusses on 'The Intelligence'
Weiterlesen »
The botched new ‘Catch-22’ adaptation reminds us that some novels are unfilmableGeorge Clooney's adaptation of 'Catch-22' shows why the project was impossible from the start, writes hiltzikm.
Weiterlesen »
The sharing economy is coming for your retirementTurns out, boomers want to live more like millennials in their golden years...
Weiterlesen »
America’s natural kidneys need more protection, not lessAs the cost of losing wetlands is better understood, the case for protecting them should strengthen
Weiterlesen »
Opinion | Disney's new 'Aladdin' wastes Will Smith in a pale imitation of the originalOpinion | Ani Bundel: Disney's new 'Aladdin,' starring Will Smith, is a mostly pale imitation of the original. - NBCNewsTHINK
Weiterlesen »
The case for Margrethe VestagerWhy a Danish politician should lead the next European Commission
Weiterlesen »
Democrats can't break the Electoral College aloneThe National Popular Vote Interstate Compact would have states agree to pledge their electoral votes to whichever candidate wins the popular vote nationwide.
Weiterlesen »
Why seaplanes are so dangerousAmerica’s National Transportation Safety Board has warned that seaplanes may no longer be a safe form of transport
Weiterlesen »