Personal Finance & Money Stack Exchange
Personal Finance & Money Stack Exchange

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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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 only recently really been getting into the media.…
Andrew Welch
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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 invariably claim that my decision is unwise.…
user102086
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If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one?

I have $1000 to invest. I use Scottrade to invest in penny stocks online, they charge $7 to buy a stock and another $7 to sell it ($14 in total). Given the high volatility of these stocks, what tactic should I use in order to maximize my EXPECTED…
Zipote
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What is the difference between hedging and diversification? How does each reduce risk?

Hedging and diversification are both used for reducing financial risks, but what are the exact differences between these two?
Pooya Yazdani
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Why might a robo-advisor service like Betterment be preferable to just buying a single well-performing index fund like SPY?

Edit: I think it would be beneficial for any answers to include whether the answerer uses a diversified portfolio or not in their own finances, and whether they have any affiliation with Betterment or other similar financial service that charges a…
Andrew Roth
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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 whether REITs are more correlated with the stock…
curious
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What is the theory behind diversification? Why does it work?

We are told always that diversification in a portfolio is good. "Don't put all your eggs in one basket." But is there mathematical theory behind diversification to back up the advice?
unknown
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Should I exclude bonds from our retirement investment portfolio if our time horizon is still long enough?

My wife and I (ages 35 and 38) have 25-30 years until we reach retirement age, and I'm doing some research regarding our asset allocation. In addition to various podcasts, articles, and online posts, I've read A Random Walk Down Wall Street, The…
Jeff Levine
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Can diversification eliminate risk or just reduce (i.e., mitigate) it?

In portfolio theory, diversification is often presented as a way to manage risk. However, does diversification completely eliminate risk or just reduce (mitigate) it? And how does this distinction apply to systematic and unsystematic…
StatsScared
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Do I need to own all the funds my target-date funds owns to mimic it?

I just calculated out that investing my Roth IRA in a Lifecycle fund will cost me about $65k more than investing directly in the underlying funds, effectively doubling the expense ratio. And the funds they choose aren't exactly low expense…
jldugger
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What ways are there to invest in stocks, options, indexes, etc, and where should one start (what funds)?

I have been poking around with investing for a few years now. I have diversified my assets a decent amount, between a home, several IRA's and 401k's, savings and checking accounts, and a little bit of commodities (gold, silver and recently looked…
jrista
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Is there data and proof that a diversified portfolio can generate higher returns than the S&P 500 Index?

I wanted to ask a follow up questions to the questions linked below. Why would I want a diversified portfolio, versus throwing my investments into an index fund? I have a personal financial adviser who follows the diversified portfolio theory, and…
jfoo
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I'm 23 and new to investing. How should I diversify my 401(k) based on my plan's choices?

My employer matches 100% of up to 4% of my gross salary. I want to contribute at least what is matched. I'm 23 and have a gross salary of $70k, and I know very little about this. I was hoping someone could help me with choosing my funds for my 401k.…
Patrick Lee Scott
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What does a well diversified self-managed investment portfolio look like?

A lot of online blogs and investing material suggest that investing in a single index is not diversified enough to avoid some types of market risk. So the question then is, what does a well diversified self-managed investment portfolio look like?…
Chris
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The Asset Allocation Paradox

I've had this problem stuck in my head for a while and I'd like some help with it. In David Swensen's Unconventional Success, the argument is made that asset allocation is the best way to get a good return in the long run for the individual, and…
BlackJack
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