Is there such a thing as over diversification? How do you know if you've overdiversified?
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Pang Zhe Liang
24 Feb 2020
Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)
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Yes, too much of everything is bad. The purpose of diversification is to lower the risk of losing signifcant portion of your portfolio during different economic periods. When over-diversify, you spread your investment too thinly into too many categories. Sure your risk will be lower, but your potential gains will be lower too.
An exaggerated example:
You think stocks are risky so you invests in T bills, T notes, Govt bonds, gold, silver, platinum, bitcoin, litecoin, ethereum, commercial REIT, hospitality REIT, residential REIT, option, futures...
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Yes, this is possible. I have answered this in a similar question previously. Here it is: https://seedly.sg/questions/hi-do-you-think-the...
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