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It’s Hard To Be A Diversified Portfolio Today

November 11, 2020

Hi. My objective as your diversified portfolio is to provide a steady investment return over time. I know there will be times I decline, but I try not to decline as much as the general market. I also try to give you a steady ride going up but alas, I’m not going to return as much as the general market. After all, I’m diversified. When one theme zigs I try to have another that zags so regardless of what is going on, not everything goes up or down at the same time.

The more you lose, the more ground you have to make up.

Starting Balance% Loss$ LossNew $ ValueTo get back to original value
25,00010%2,50022,50011%
25,00020%5,00020,00025%
25,00050%12,50012,500100%

In today’s environment, few stocks are moving the markets so my diversification doesn’t look as attractive, but over time, I believe I will prove my worth.

There are approximately 9,000 companies in the various global indexes but only 30 of them account for 70% of the total gains over the last five years. More than half of the 30 companies are in the U.S.

Of the 30, ten stocks accounted for 50% of the gains:

U.S.                  4
China              4
Canada           1
Brazil              1

Even my college endowment fund brethren holding diversified portfolios have not performed well. (Source: Bloomberg.com)

I faced a similar situation in the late 1990s. Abandon diversification in favor of the indexes or continue to take the long view and lose less when the markets decline but participate when they rise. My portfolio owners did very nicely sticking with me in the first decade of 2000s. I think I’ll continue as I am.

Best Regards,

Your Diversified Portfolio

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