Yale Endowment Learns Lesson on Diversification

Strong long-term performance has made the Yale University endowment fund—with a mere 4% weighting in U.S. stocks and heavy allocations to alternative investments– the widely accepted diversification model, according to a recent article in Barron’s.  In the last ten years, however, the approach hasn’t worked so well. The fund has “lagged the U.S. equity market amid one of the great bull runs in history,” the article says, adding that a buy-and-hold investor in the S&P… Read More

Portfolio Strength in Diversification

Recent market volatility notwithstanding, 2016 has been a “relatively good” investing year. This according to Zachary Karabell, head of global strategy at Envestnet, in an article for Barron’s. His opinion, however, is based on performance of a diversified portfolios as opposed to “esoteric” strategies such as “those of many hedge funds.” The performance of assets this year, he writes, “should be a sign that markets are stable and performing decently, rather than a harbinger of… Read More

Diversification: The Only Free Lunch on Wall Street

The value of long term asset diversification, sometimes known as “the only free lunch on Wall Street” is discussed in a recent MarketWatch article offering “Five Steps to Beating the Market.” “Stock investors typically regard ‘the market’ as essentially the Standard and Poor’s 500 Index of large U.S. growth stocks.” The article tracks and summarizes financial performance records since 1928 for large-cap blend the (S&P 500), large-cap value, small-cap blend, small-cap value stocks and a… Read More

Diversification: How Many Stocks Is Enough?

In his bi-weekly Hot List newsletter, Validea CEO John Reese offers his take on the markets and investment strategy. In the latest issue, John looks at the issue of diversification and the performance of different-sized portfolios that he runs on Validea.com. Excerpted from the May 11, 2012 issue of the Validea Hot List newsletter No one — not Warren Buffett or Peter Lynch or David Tepper — is right on every single stock pick. And… Read More

How Many Stocks Is Enough?

How many stocks should an investor own in order to diversify away stock-specific risk? Some interesting data shows that it may be fewer than you think. The data comes from hedge fund guru Joel Greenblatt’s book, You Can Be A Stock Market Genius, and was highlighted by top value investor Whitney Tilson a few years back (and recently reprinted on The Motley Fool website). According to Greenblatt’s book, the risk-reduction benefits of adding more stocks to… Read More

Faber: Stay Diversified

Marc Faber of the Gloom, Boom & Doom Report thinks it will be very hard for stocks to eclipse their 2011 highs anytime soon, but he says he still would favor stocks over Treasury bonds. Overall, Faber says in an interview with Bloomberg, investors who have a long-term time horizon should stay diversified, owning some bonds, some cash, some gold, some equities, and some real estate. [youtube=http://www.youtube.com/watch?v=KMSW_VxvwhU]  

Are Concentrated Funds More Volatile? Maybe Not

How many stocks is enough for your portfolio? We examined that question a little while back, and now new evidence supports the idea that “enough” might be a lower number than most people think. The data comes from Morningstar Inc., which was recently asked by The Wall Street Journal to look into the issue of diversification — specifically at how concentrated funds of 40 or fewer holdings fared in terms of performance and volatility compared… Read More

How Many Stocks Is Too Many?

One of the key questions any investor must grapple with is, “How many stocks should I own?” Jonathan Burton addresses that issue in a recent MarketWatch column, taking a look at focused funds — those that hold relatively few stocks compared to most other mutual funds. “Focused funds — portfolios with only a couple of dozen holdings — are getting attention in a market where stock selection is more important than ever,” Burton writes. He… Read More