facebookI understand that diversify is good as saying do not put all your eggs in on basket. However, can you over-diversify your investment portfolio? - Seedly

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Mysteriously

Mysteriously

20 Apr 2020

Stocks

I understand that diversify is good as saying do not put all your eggs in on basket. However, can you over-diversify your investment portfolio?

Is there such a thing as over diversification? How do you know if you've overdiversified?

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Discussion (2)

Pang Zhe Liang

Pang Zhe Liang

24 Feb 2020

Senior Financial Services Consultant at AIA Singapore Private Limited

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...

Here is everything about me and what I do best.

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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