Diversification is hailed as “the only free lunch on Wall Street”, based on the famous quote by Harry Markowitz. Some of us accept this as a fact and take a diversified approach to our portfolios.
Then, a stock our buddy picked quadruples its value or the S&P 500 outperforms other asset classes over a multi-year period (as we’ve seen in the last few years). In times like these, it is easy to lose sight of why diversification is so important.
Donald Trump will be the president of the United States. The world is not ending. We got up this morning and we went to work. Some of us are a little happier than we were Tuesday.
Some of us are a little sadder. My job today isn’t to offer criticism or praise of the politics. I simply want to lay out a pragmatic approach for how most people should think about their portfolio, post-election.
We explain how security prices are set—and change—based on the collective knowledge of buyers and sellers. Armed with this information, investors can be more confident about the power of the financial markets.