The phrase “diversification is the only free lunch in investing” is attributed to the Nobel Prize laureate Harry Markowitz. Investors accept this principle with few exceptions, however when faced with market turbulence many will retreat to the set of risks that are most familiar to them. In the process they often reduce the diversification of their portfolio and alter the risk and reward dynamics of their investments.
This paper examines the importance diversification, and is part one of a trilogy series outlining the principles behind Koda’s investment philosophy: diversification, upside/downside capture and time in the market. Parts two (‘The Upside of Minimising Downside‘) and three (‘The Upside of Time in the Market‘) are also available on Koda’s Insights page.
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