There is an old joke in finance that goes something like this. A man walks into a casino, places everything he owns on red, and wins. He is called a genius. Another man walks into the same casino, spreads his chips across red, black, green, the dealer’s tie, and the chandelier, and loses slowly over […]
What’s More Dangerous: No Diversification or Bad Diversification? Read More »
Money is old. Portfolio theory is not. But the instinct behind portfolio theory – do not put everything in one place – is arguably older than written language itself. Long before Harry Markowitz published his Nobel Prize winning work in 1952, merchants in Florence, traders in Constantinople, and farmers in Mesopotamia were already practicing diversification.
Pre-Industrial Portfolio Theory: Diversifying Like a Medici Merchant Read More »
Napoleon Bonaparte wanted to conquer Europe. What he actually conquered, without meaning to, was the way money works. The man who nearly unified a continent by force ended up unifying something far more lasting: the logic behind how investors spread their bets. This is not a story about Napoleon the general. It is a story
How the Napoleonic Wars Accidentally Invented Modern Diversification Read More »
You own thirty stocks across five sectors. You hold some bonds. Maybe a sprinkle of international exposure. You sleep well at night because you believe your portfolio is diversified. But what if it is not? What if all that apparent variety is just the same bet wearing different costumes? What if your portfolio, for all
There is a word in finance that functions like a diplomatic passport. It gets you through any conversation without being questioned. Say it in a meeting, and heads nod. Print it in a prospectus, and money flows in. That word is diversification. It sounds responsible. It sounds mature. It sounds like something your financial advisor
Why “Diversification” Is Just a Fancy Word for Mediocrity Read More »
There is a quiet problem sitting inside most investment portfolios, and it has been there so long that people have stopped noticing it. It is the financial equivalent of a friend who keeps gaining weight at every dinner party but never gets mentioned because everyone is too polite. The problem is market cap weighting, and
4 Signs Your Portfolio is Suffering from “Market Cap Obesity” Read More »
Why spreading your bets might be quietly destroying the metric it was meant to improve Somewhere along the way, diversification stopped being a strategy and became a religion. The faithful recite the creed without question. Spread your bets. Own a bit of everything. Sleep well at night. It sounds wise. It sounds responsible. And for
Why Diversification is Failing Your Sharpe Ratio Read More »
Walk into any investing seminar and you’ll hear it repeated like a mantra: diversify, diversify, diversify. It’s the one piece of financial advice that everyone agrees on, from your nervous aunt to Warren Buffett. Well, almost agrees on. Because buried in that consensus is a question nobody wants to ask at polite dinner parties. When
Diversification: Are You Diversified… or Just Scared? Read More »