Dislikedwhat are the high liquidity uncorrelated market or instruments according to you guys ?
So, it can be helpful in diversification of portfolio.Ignored
Currency Pair Diversification 10 replies
Diversification 7 replies
Diversification problem 2 replies
Broker Diversification 3 replies
Chinese reverse diversification 7 replies
Dislikedwhat are the high liquidity uncorrelated market or instruments according to you guys ?
So, it can be helpful in diversification of portfolio.Ignored
DislikedThere are those that say "don't put all your eggs in one basket".
There are those that say "put all your eggs in one basket"
I believe too much diversification is unproductive and too little is too risky.
Unless you want to take the chance on high risk for high reward, best bet is somewhere in between for long term safeguarding AND profitability that is worth the time and effort. I personally like to diversify between 3 or 4 instruments at a time.
So my ideal cliche would be... "Put all your eggs in only a few baskets and...Ignored
Dislikedfrom what I have seen and read, the current financial crisis was as bad as it was because the tools to measure risk and the models that assumed diversification are wrong.
I do not believe one can truly diversify, as a systemic shock will impact all assets classes. In my opinion although I am not a financial expert...one must think of correlation coefficient, and diversify with risk on and risk off environment in mind.Ignored
The true meaning of Diversification is when an asset is
self-sustaining, and in positive gear, then diversifying into another
asset and repeating the process.
To diversify without a self-sustaining asset is like splitting your $1M into
5 different banks "to protect it from losing it through unforeseeable
misfortunes" and NOT realizing that your losing money through more fees
and charges.
Disliked
The word diversification (diversify), and expressed by the media and so-called Professionals (making money through commissions), is no different from the same BullSh*t that says, "buy and hold", "negative gearing" or "buy low and sell high".
[center][color=DarkRed]The true meaning of Diversification is when an asset is
self-sustaining, and in positive gear, then diversifying into another
asset and repeating the process.
To diversify without a self-sustaining asset is like splitting your $1M into
5 different...Ignored
DislikedExcellent discussion CrucialPoint and Split. Ideally you would want the investments you diversify into to have the ability to all gain over a period of time, while not having the ability of all losing simultaneously should market factors change. This is a key ingredient to making diversification work. It's almost like finding an off balance arbitrage opportunity (from a macro perspective).Ignored
DislikedThanks for your input CrucialPoint, however, I disagree with your notion that buy and hold along with buying low and selling high are BS, and as the saying goes "for traders the market price is always right but for investors the market price is almost never right" holds true in your comment. You seem to be a strong advocate of trading with total disregard for investing, that is fine. Everyone has their perspective and have their way of making money, calling investing through buy and hold and buy low and sell high (value investing) BS however is...Ignored
DislikedI do agree on your comments on diversifying into self sustaining asset classes, you wouldn't be really diversifying if you traded/invested differently, would you? As for your point on commissions, could you further elaborate? I have no clue what your talking about and what commissions have to do with diversification.Ignored
Disliked...I believe the financial world will never regain its dignity until this systematic risk can be diversified. It's gotten to the point where the livelihoods of the world are put in the hands of imbecile politicians who are just trying to get elected and get their own. People in the know can take advantage for personal gain and sway policies in their favor... blah blah blah.Ignored
DislikedThe financial world don't give a sh*t about dignity.
They don't need to regain dignity... they need more profits.Ignored
DislikedYou can also diversify in another way, by time rather than asset. Let's say you only trade one asset. If you have a short term trading style you can effectively diversify by taking many similar risk trades over the course of a year even though you only ever trade the same asset.
All you want is your account not to be overly dependent on the outcome of a single trade (or set of trades simultaneously running). Manage that and for all practical purposes you are diversifying well enough.
PS Note that this also brings in the idea of position...Ignored
DislikedI barely scratched the surface with this point of view. It goes far deeper than what you just replied. But that is another story.
Financial experts, Financial advisers, Financial brokers, company front marketers to provide information and educational services, trading brokers, etc... the list goes on. They are paid through commissions. Any Financial expert will inform for you to diversify and tell you so it will protect your assets... No, the expert will tell you that so you pay to get the paper-works done. Their best interest is not...Ignored
DislikedExcellent discussion CrucialPoint and Split. Ideally you would want the investments you diversify into to have the ability to all gain over a period of time, while not having the ability of all losing simultaneously should market factors change. This is a key ingredient to making diversification work. It's almost like finding an off balance arbitrage opportunity (from a macro perspective).Ignored
DislikedAnd that is the problem. Unfortunately and increasingly so with the globalized world we now live in., Systematic risk is the only risk in which you cannot diversify against. The only way is to minimize the damage, in the event that the system crashes in the way of investments which offer less risk.
In doing so your return decreases. When our money is put in the hands of fund managers and wanna be billionaires who have free will to gamble with it it is not so hard to choose riskier investments in the form of shares. No ones going to want to invest...Ignored
DislikedI totally agree with your post 2+2+4ex thanks for your comments.Ignored
DislikedHow to diversify effectively is a subject in itself and has more than one solution. Diversifying across asset types and investment strategies is the standard approach though you are still subject to a shock to the entire financial system. This is what tends to catch out the major banks & hedge runs when they foul up royally every now and again, their risk and correlation models stop being valid as the world stops acting "normally" for a period.
Separately, all investing/trading carries transaction costs, it is unavoidable and not an extra...Ignored
DislikedThis is a key ingredient to making diversification work. It's almost like finding an off balance arbitrage opportunity (from a macro perspective).Ignored
DislikedSystematic risk is the only risk in which you cannot diversify against. The only way is to minimize the damage, in the event that the system crashes in the way of investments which offer less risk.
In doing so your return decreases.Ignored
DislikedHow to diversify effectively is a subject in itself and has more than one solution. Diversifying across asset types and investment strategies is the standard approach though you are still subject to a shock to the entire financial system.
Separately, all investing/trading carries transaction costs, it is unavoidable and not an extra cost involved in diversification. Sure, some markets operate with somewhat higher costs than others and this is a practical limitation of achieving theoretically perfect diversification.Ignored