Diversification

Diversification...

 

Interesting read.

 

A full time trader / investor will play on his strength. Most of us however would rather trade higher return (ie higher risk) for a more consistant return.

 

There is no statistical evidence that higher risk delivers consistent return.

 

The theory is correct, however it is the creature inside us called 'emotion' that affects our rationals which in term stop us from taking profit or cutting loss when comes to the crunch, especially during crisis.

Just think back, how much has our emotions / sentiment towards a paritcular investment product affected our judgement during GFC?

Glad that I am not in the fast lane anymore.

 

What I read inbetween the lines when I read this sort of article is, make as much money as you can by sticking to what your good at, be it trading BHP options or fixing cars, and then regularly invest into a low cost global index fund over your 50 year working life and take whatever returns we acheive as a global human species, but most importantly when it comes to making money - stick to what your good at.