As with everything we read or learn from others, we need to understand the "essence" instead of just blindly parroting what others say...
Of course I diversify across different asset classes.
Then again, for my equities investment portfolio, I don't own more than 10 stocks.
To some, its too "diversified"...
To others, it may be too "concentrated"...
Compared to those retail "investors" who have most of their net worth concentrated into equities, but they are spread across 50 stocks or more.
Who is more diversified?
Its quite easy to determine.
Did you panic or have sleepless nights beginning of March when Russia invaded Ukraine?
We all have different competences and pain thresholds.
Crash got sound.
Don't let the recent bounce go to waste if you realised you have taken on too much concentrated risks... Wink.
Smol,
ReplyDeleteReplacing "simplicity" with "diversification":
Investing should be made as diversified as possible, but not more diversified LOL.
Most people are already the most concentrated in one aspect of their personal finance ... their job/career.
Actually 2 ... their home.
For most who don't have the inclination or time, a monthly or quarterly broad indexing approach is fine.
Coupled with allocations to cash, money market funds, short duration bonds, and intermediate safe govt bonds to take the overall portfolio volatility to a level such that they won't panic sell if stock markets tank -60%.
For professionals or retail investor "hobbyists", usually we'll gravitate towards a handful of assets or even specific names within an asset class as our playpen or combat arena.
And try to get to know their nuances like the back of our hand.
Very few will have the mental bandwidth of a go-anywhere-invest-anything George Soros.
If I try to go beyond my circle of competence, I treat it as Toto i.e. speculating with small position sizes for laughs.
Spur,
DeleteThat's why Warren Buffett has recommended passive indexing to anyone and everyone - including his wife when he is gone ;)
The irony is when it comes to investing/trading, the more esoteric the story/spin is, the more bei kambings are drawn towards them...
Unfortunately for some, instead of treating it as ToTo, they went all-in...
It took a full bull/bear cycle for me to realise the folly of my early days!
I've put in my share of 10,000 hours.
Got one master all in Alibaba.
ReplyDeleteHe really is convicted and balls of steel.
Small Time Investor,
DeleteCharlie Munger didn't all-in, but he doubled and tripled down.
Nothing wrong if we know what we doing.
I hope I have the same level of conviction when an opportunity of a lifetime appeared before me.
Only difference is I prefer to add to winning positions - average up.
I've done averaging down before...
That's how I discovered my "uncle point".
I've promised myself NEVER go there ever again!!!
It was the closest to me "chopping fingers" and never invest ever...
I came this close to joining the CPF gang...
LOL!
Finally Alibaba, JD, et al going to chiong. Lol.
DeleteSpur,
DeleteWell, let's hope the Bloomberg report is true...
Imagine if not, 200 over US listed Mainland Chinese companies will get booted out of US exchanges this summer!?
I wonder if SGX is making any moves to attract some of these affected Mainland China companies to list over here instead?
Or will it be a case of once bitten twice shy?
Baba jumped +8% at the open. Then quickly dropped to +1.9% as of this comment.
DeleteI bet some long suffering holders couldn't wait to use this pop to sell lol.
Looks like people want to see actual proof before there's conviction. Fool me once shame on you, fool me twice... ;)
Spur,
DeleteI guess some are using the rip to reduce their risks going forward...
China stocks today suffer from 2 geopolitical headwinds despite its long term growth potential:
1) Will they come under sanctions too if China supports Russia militarily tomorrow?
2) Investors now know how the West will react when China attacks Taiwan in the future.
Is there a fixed formula to measure diversification? I also like to think that I am diversified Panda/Koala. :-)
ReplyDeleteCW,
DeleteYou've come to the wrong watering-hole if you need "precision" as in formulas...
I'm left-handed and right brained leh. Math and precision not my forte :(
But if you can accept grey, grey, "agar agar du hor" (pronounce in Teochew), then like I've said, if you can sleep soundly at night during the during the Ukraine price free fall, you're diversified!
Don't worry. I won't let you go away empty handed one...
You have posted a lot of charts of STI - got multiple supports and resistance levels ;)
Have you ever posted similar charts on the HK Tech Index?
It probably explains why your STI portfolio is 3 bagger, but your HK Tech FOMO; monkey see monkey do; copy cat position is deep underwater...
Diversification/concentration is not just about position size; its about how much we know about our chosen choice of vehicles ;)
Being a veteran with STI does not automatically make one a "veteran" when it comes to HK Tech sector too ;)
You definitely have an edge over bei kambings when it comes to Keppel, Sembawang, DBS, etc.
But do you have the same edge with Tencent or Alibaba?
Would you sleep better owning 100 HK Tech stocks?
Or maybe even if you just owned a grand total five STI stocks, that's probably more than "diversified" enough for you?
You should know yourself better than me ;)
I'm not the Indian Chief; I'm just a facilitator.
Diversification is for...
ReplyDeletethose who cannot find their edge and thus have to dabble a bit in everything.
Rainbow,
DeleteIn addition, like what Spur has said, the more we are unskilled or are "bei kambings" in our chosen vehicle, the more important we should "right size" our bets accordingly.
As with everything, there's always a BUT...
The advantage of youths is they don't know what cannot be done!
Even if lost everything, how much can they lose?
With decades ahead of them, can recover. Time is on their side!
As for old fogeys in their 60s or 70...
Which naturally leads to whether we are climbing UP the mountain or strolling DOWN the mountain - capital accumulation or capital preservation.
Sounds "simple" - diversification or concentration.
Once we peel off the layers of the onion one by one, it would make us "cry"...
"I'm so confused oredi!
LOL!