...This self fulfilling prophecy assured me of a steady income and if it worked out profitably everybody wins. I also recommended holding on to losers and winners until the time came to move some positions around. I preached low expectations and not using food money, so the attitude was positive and hope supreme. In the day, there was little or no information available so if I was right I was a genius and when wrong, I was a bum. As long as clients spoke to me, I made a living. Today, however, diversification means so much more than sprinkling a few dollars over ten symbols hoping for one ten-bagger so the dogs didn't matter.
Today it's a lot easier to find information, but harder to build a diversified portfolio and watch it. So many opt to not bother, and leave it to the fund managers to do the dirty work.
To directly answer the question, however, I suspect this investor is self-directing her own portfolio. I am not sure what positions are sitting in the portfolio today, but diversification has morphed into sector weighting, sophisticated buy/sell signals, and it requires a plan, strategy and philosophy.
Are you an active trader or long-term investor? Do you like to read? Do you believe in yourself, even though, you listen to CNBC all day? Do you consider a stock the same way you look at your significant other?
Some investors still use the "buy and close your eyes" method of stock picking. For me that's leaving too much to risk. What I am asking myself these days is whether to pile into a hot sector like cybersecurity or biotech stocks - disregarding all the other sectors as the stocks are ripping higher as you read this. I think microcap portfolios have similarities to smallcaps and higher, but have unique qualities that are unlike their larger-cap cousins. The qualities range from no revenues to historical losing quarters. I sometimes call these "story stocks." I do that because they have good stories, make encouraging press releases and move on any news in their sector. Certainly weighting long positions in hot sectors makes so much more sense, today, rather than dragging down performance in non-performing sectors. It's definitely worth a try!
DEFINITION of 'Diversification'
A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.
Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.
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