Facebook, Amazon, Apple, Netflix and Google collectively form the acronym FAANG. You may have heard about this group of stocks in the media recently as they’ve outperformed the market significantly this year. Should you therefore be changing your portfolio allocation to gain more exposure to these companies? That’s the question addressed by Jim Parker, a Vice President at Dimensional, in today’s recommended reading article "Catchphrase Investing." ... [Continue Reading]
Articles and resources related to Diversification.
During our recent client event presentation at the Minnesota History Center, we discussed the importance of asking good questions. In a world in which most of us carry around small computers in our pockets that are capable of tapping into a seemingly infinite pool of data and information that is the internet, the value of the answers we find corresponds directly with the quality of the questions we ask. When exploring answers for many commonly asked financial questions, the risk that one faces ... [Continue Reading]
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]
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]