TRIVIA TIME: how many stocks make up the Wilshire 5000 Total Market Index (a widely used benchmark for the U.S. equity market)? While the logical guess might be 5,000, the reality is that as of December 31, 2016, the index actually included around 3,600 companies. In fact, the last time this index contained 5,000 or more companies was at the end of 2005.1 Surprisingly to most, this reduction in investable companies is nothing new. Over the past two decades, there has been a steep decline in ... [Continue Reading]
Articles and resources related to Diversification.
Traditionally, when we discuss the concept of a highly concentrated portfolio, we talk about risk. As we know, putting all of your eggs in one basket means a single mistake can be very devastating. What is often less emphasized is how a concentrated portfolio will most likely underperform a diversified portfolio over time, and how this can negatively impact an investor's financial goals. How can we say that a concentrated portfolio will most likely underperform? After all, we don’t have a ... [Continue Reading]
“If you can predict the future, you shouldn’t worry about being diversified” – Greg Carlson, CCM CEO and Co-Founder Diversification has many benefits for investors when utilized appropriately. A diversified portfolio can have lower volatility, higher returns and increase the probability of a successful retirement. Because portfolio diversification is so universally accepted and often coined as ‘the only free lunch in investing,’ people frequently assume that it will only have a positive ... [Continue Reading]
The reinsurance business is rapidly growing in size and popularity as investors are attracted to the return potential and risk diversification that this asset class can deliver. Total issuance of catastrophe bonds has tripled over the past five years, which has some investors worried that the traditional 16% annual returns of the asset class may no longer be achievable. Berkshire Hathaway owns some of the largest companies in this industry and their chairman and CEO, Warren Buffet, has recently ... [Continue Reading]
Over the past eighteen months, we’ve witnessed a historical collapse in oil prices driven by a tremendous increase in supply and lackluster global demand. The implications of such a dramatic fall in oil prices are wide ranging. Here in the U.S., we’ve seen many small oil companies fall into bankruptcy, but it’s the largest oil producing countries that have been most impacted by the decline in oil revenue. Saudi Arabia ran a budget deficit of 16% of GDP in 2015 and has even considered publicly ... [Continue Reading]