Diversification = cop out?

[rick James]

I think so.

The more I look at this idea, the more I think it's merely a way for Financial Planners/Advisers etc to make sure nothing goes wrong i.e. with enough diversification, investors are unlikely to record any massive losses. By the same token though they're probably restricting the amount of earnings they get.

thoughts?

 

[bigdadymac]

I think so.

The more I look at this idea, the more I think it's merely a way for Financial Planners/Advisers etc to make sure nothing goes wrong i.e. with enough diversification, investors are unlikely to record any massive losses. By the same token though they're probably restricting the amount of earnings they get.

thoughts?

I think its a smart way of investing personally. By diversifying in property, shares, cash and fixed interest you can set yourself up to receive a more consistent return each year and limit your investment risk substantially. To me it just makes sense.

 

[rick James]

I think its a smart way of investing personally. By diversifying in property, shares, cash and fixed interest you can set yourself up to receive a more consistent return each year and limit your investment risk substantially. To me it just makes sense.

It makes it mcore consistent and safe, for someone who doesn't know what to invest in. Well thats the theroy according to this here text book - but man, some of the advisers I know dont diversify at all and make a lot more than their investors, I guess they wouldn't risk their investors money in such a risky investment model - but if they're prepared to risk their own you've gotta wonder...

 

[Fat Pizza]

Diversification is good for investing, but not so important for trading. With trading, it is more important to be in the right thing at the right time.

 

[Squeak]

Making huge wads of cash isn't really the aim of FP, is it? Would've thought security with reasonable earnings/growth was more important than massive returns.

 

[Knight Rider]

Advisers aren't in the game to lose their clients' money by putting it in one stock or asset class. diversification reduces the downside risk, provides negative correlation to other asset classes and therefore allows for more regular income distribution.

You'll also find that like most people, their content to perhaps lose their own money on one particular call but are less likely to want to make that call for their clients.

 

[rick James]

Making huge wads of cash isn't really the aim of FP, is it? Would've thought security with reasonable earnings/growth was more important than massive returns.

Depends on the investor really.

 

[rick James]

You'll also find that like most people, their content to perhaps lose their own money on one particular call but are less likely to want to make that call for their clients.

good point

 

[Crow-mo]

I think so.

The more I look at this idea, the more I think it's merely a way for Financial Planners/Advisers etc to make sure nothing goes wrong i.e. with enough diversification, investors are unlikely to record any massive losses. By the same token though they're probably restricting the amount of earnings they get.

thoughts?

google markowitz and portfolio theory.

there is science behind these ideas. though most financial planners wouldn't be trained enough to their CAPM from their Capt'n.

 

[TheBloods]

Yep, portfolio theory is quite an establish concept and demonstrated the diversification improves return relative to risk as against holding individual stocks.

Hacing said that, most financial planners don't have a clue about finance.

And what's worse, is that it's a very closed industry and diffifcult to break into, hence it will continue to lack a broad knowledge and experience base.

 

[FIGJAM]

Financial Planners

Financial Panther?!??

 

[Crow-mo]

And what's worse, is that it's a very closed industry and diffifcult to break into, hence it will continue to lack a broad knowledge and experience base.

that's not true. it's hard to break into without the proper qualifications and educational standards. I'm not talking about the dodgy super planner in your mall, but if you want to get into an Investment Bank you need to have the academics. they're not the problem, it's the dodgy ones that are the issue - and that parts easy. it's up there with used car sales

 

[rick James]

google markowitz and portfolio theory.

there is science behind these ideas. though most financial planners wouldn't be trained enough to their CAPM from their Capt'n.

i've heard that "a third, a third, a third" theory etc I guess I've just seen people do very well without subscribing to it, namean?

 

[Crow-mo]

i've heard that "a third, a third, a third" theory etc I guess I've just seen people do very well without subscribing to it, namean?

i've seen people do very well at the track.

do you feel lucky?

 

[TheBloods]

that's not true. it's hard to break into without the proper qualifications and educational standards. I'm not talking about the dodgy super planner in your mall, but if you want to get into an Investment Bank you need to have the academics. they're not the problem, it's the dodgy ones that are the issue - and that parts easy. it's up there with used car sales

The local mall ones are generally crap, and I would neither want to work for one nor use one.

The 'more professional ones' are better, but still a fairly closed shop.

 

[TheBloods]

i've heard that "a third, a third, a third" theory etc I guess I've just seen people do very well without subscribing to it, namean?

If you've only been following the stock market for a few years, you'll notice that nearly everyone does well - that's the way the market is these days. It will change again though.

 

[Unleash Hell]

If you've only been following the stock market for a few years, you'll notice that nearly everyone does well - that's the way the market is these days. It will change again though.

Yeppa, as long as the market keeps rising everyone will do well .

Diversification is the conservative mans way of investing. In reality they should stick their money in ING and earn 5.25% int, probably earn more quicker.

 

[Crow-mo]

The 'more professional ones' are better, but still a fairly closed shop.

No it's not. get yourself an MBA or a Master's in Finance and off you go.

 

[TheBloods]

No it's not. get yourself an MBA or a Master's in Finance and off you go.

I have a Bachelor of Commerce, PostGradDiploma in Finance, Masters in Applied Finance, I'm a chartered accountant and have nearly two decades of finance experience (including being a director at Australia's leading investment bank). It's a fairly closed shop!

 

[Crow-mo]

I have a Bachelor of Commerce, PostGradDiploma in Finance, Masters in Applied Finance, I'm a chartered accountant and have nearly two decades of finance experience (including being a director at Australia's leading investment bank). It's a fairly closed shop!

snap. no it's not.

by the way what do you think about the multiples being offered in your hostile takeover of the ftse?

 

[TheBloods]

snap. no it's not.

I think it depends on the luck of being in the right time at the right place.

by the way what do you think about the multiples being offered in your hostile takeover of the ftse?

I haven't really followed Macquarie's takeover that closely (that wasn't the investment bank I was referring to ) but I thought it interesting that they are looking to saddle the LSE with a ridiculous amount of debt.

 

[Crow-mo]

II haven't really followed Macquarie's takeover that closely (that wasn't the investment bank I was referring to ) but I thought it interesting that they are looking to saddle the LSE with a ridiculous amount of debt.

Australia has more than one tin pot investment bank?

But that's the point of an LBO, how else are they going to hit a decent irr? the successful buyer will do the same, probably more as they'll pay a higher price.

 

[Todman]

Invest in your strengths.

If you know the sharemarket , invest there
likewise property.

Don't invest blindly

I would not think of diversifying unless I had 500K.

 

[TheBloods]

Australia has more than one tin pot investment bank?

Of course not!! It was the subsidiary of a foreign bank.

But that's the point of an LBO, how else are they going to hit a decent irr? the successful buyer will do the same, probably more as they'll pay a higher price.

Of course, but the brief details I saw (as I said I haven't followed it closely) it looked like they were going to overload it.

 

[Sexiano Ronaldo]

I have a Bachelor of Commerce, PostGradDiploma in Finance, Masters in Applied Finance, I'm a chartered accountant and have nearly two decades of finance experience (including being a director at Australia's leading investment bank). It's a fairly closed shop!

Van Der Power is that you?