The Case Against Over-Diversification: Why Less Can Be More
Having fewer assets in a portfolio can potentially be beneficial for investors in several ways:
Increased focus and expertise: With fewer holdings, investors can develop deeper knowledge and expertise about each investment. This allows for more informed decision-making and potentially better returns.
Lower transaction costs: Fewer holdings mean less frequent trading and rebalancing, which can reduce overall transaction costs and fees.
Easier management and monitoring: A smaller portfolio is simpler to track and manage, allowing investors to stay on top of their investments more effectively.
Higher potential returns: Concentrating investments in a smaller number of high-conviction picks can lead to higher returns if those picks perform well. Warren Buffett has advocated for this approach.
Greater flexibility: Smaller portfolios can be more nimble, allowing investors to take advantage of market opportunities more quickly.
Lower minimum investment requirements: Some investments have high minimum requirements. A smaller portfolio allows investors to meet these minimums for a select few investments rather than spreading capital too thin.
Reduced overlap and redundancy: Fewer holdings can help avoid overlapping investments and redundant exposure, potentially improving overall portfolio efficiency.
Better alignment with goals: A more focused portfolio can be tailored more precisely to an investor's specific financial goals and risk tolerance.
Easier diversification: Even with limited capital, investors can achieve meaningful diversification across asset classes through carefully selected ETFs.
However, it's important to note that having fewer assets also comes with increased concentration risk.
The key is finding the right balance between focus and diversification based on individual circumstances, goals, and risk tolerance.
Alpha Hedge AI Algo Portfolio Review
The Alpha Hedge AI-Algo Portfolio may contain either 1 Alpha or 1 Hedge Asset at a time, depending on the Cycle of the S&P500.
The tables and graphics below present historical data on the Alpha and Hedge Cycles. The Performance considered Profits reinvested, no contributions, no withdrawals and dividends are excluded.
Alpha Hedge AI-Algo Portfolio Review: 11/11/24
Over the past decade, we developed the Alpha Hedge Algorithm using advanced quantitative methods, machine learning, neural networks, and, more recently, AI to build a portfolio designed to exponentially grow wealth while minimizing risk.
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