In my last post we discussed the three key concepts that determine the price of an individual security. Here we’ll explore the importance of diversifying your investments.
More than five decades of academic research has confirmed two key benefits of diversifying and they’re among the most powerful concepts in financial economics: (a) Having a diversified portfolio reduces your exposure to different types of investment risk and (b) diversification can also improve your expected returns. Here you’ll learn how to keep your investment costs down; limit your exposure to company-specific, country-specific and investment style risk; succeed in all types of market cycles and how to be properly compensated for the calculated investment risks you do take.
- Insight #4: The Full Meal of Global Diversification
- Insight #5: Managing the Market’s Risky Business
- Insight #6: Get Along, Little Market
In my next post, we’ll look at the four keys to understanding risk and return factors.