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04 May, 2016

The Polyphony of Markets

It is often said (including by us) that diversification is the only free lunch in investment.  That is to say that there are no magic bullets in the investment world, no secret sauce that the super rich or connected use to beat the markets, and no substitute for discipline, and repeated consistent process.  Other than diversification.  Diversification for its detractors is a way of guaranteeing you won't have the best performing portfolio in the world - but truthfully we find that most people will happily give up the 'best' return in exchange for a guarantee not to have the worst. Diversification smooths the ride, and means that over time you get more return per unit of risk you are exposed to.  Here Jim Parker, Vice President at Dimensional Fund Advisors explains why diversification has been a mainstay of consistent investment performance for over 100 years.

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by John Stirling