Wednesday, January 31, 2007
Everyone talks about diversification and ya it’s true you have to be diversified if you want to spread out your risks, limit your downside, protect your nest egg blah blah blah…. But what about being too diversified? Personally I don’t like the idea of being diversified just because you’re supposed to be. In my opinion if you’re going to blindly diversify your holdings across multiple sectors, currencies, countries etc… why bother buying stocks? Just buy a few index funds and get it over with. Why waste the time and commission fees buying individual stocks? If you diversify too much you’re going to basically mimic the index anyways. I’m not telling you that diversification is bad I’m just saying that personally I think you should buy what’s cheap and if that results in you becoming diversified over time so be it, but don’t buy a fully valued company just for the sake of diversification… in my opinion that’s just stupid (you can’t beat the market by mimicking it).