The Money with Katie Show How to Construct a Diversified Stock Portfolio of Major Index Funds
11 snips
Oct 26, 2022 AI Snips
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Diversification's Risk-Return Paradox
- Diversification reduces portfolio risk by combining uncorrelated stocks but seeks to maintain returns.
- Adding riskier assets can lower total risk if they are not highly correlated, highlighting the risk-return paradox.
Risk, Return, and Factor Investing Limits
- Higher returns depend on accepting systematic market risk, not all risks.
- Factor investing strategies that try to exploit anomalies lose effectiveness as more investors use them.
Rental Property Investing Shift
- Rental property investing once yielded quick cash flow after 2008 but has become more competitive and less lucrative.
- Arbitrage opportunities shrank from 2% gross return to about 0.5%, forcing reliance on capital appreciation.