Why Diversification Is So Important

The reason we rebalance is it reduces the volatility drag. It keeps our portfolio from becoming overly concentrated in one asset, increasing the expected volatility above our target wat our risk enceis. A porfolo's expected geometric, or compound return is higher than just the weighted average of the expected geometric returns of the individual assets. As investors, we only get one shot. We don't get to monte carlo simulate our porfolio. Whatever returns we get, that's what we get.

Transcript

Play full episode

The AI-powered Podcast Player

Save insights by tapping your headphones, chat with episodes, discover the best highlights - and more!

Get the app