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Showing posts with label edward o'neal. Show all posts
Showing posts with label edward o'neal. Show all posts

Wednesday, 6 October 2010

Diworsification is Good for You

Mythic Investments

We all know that over-diversifying our stock portfolios is bad for our wealth. Even if our main aim is simply to avoid the problems of correlated stocks all falling together it’s well known that you can get most of the benefits of diversification from a portfolio of no more than fifteen companies. Anything else isn’t diversification it’s diworsification: it adds no benefit and costs us more.

Only, like so many well-known truths about stocks, this is a myth. Owning as few as fifteen stocks opens you up to all of the terrible things that happen to investors that take on too much risk. In the worst case everyone loses money and you get a socialist government. How bad is that?