Hi Shawn,
With StashAway, it is important to view the "risk %" as how it changes your actual portfolio rather than a true indicator of risk. See how it changes your portfolio allocation across different markets and assets.
I would like to share a less talked about point on diversification. Over-diversification can expose you to more risk than it reduces.
It is important, as Warren Buffett mentioned, to stick within our circle of competence. Buying into something we do not understand for the sake of diversification can actually expose us to more risk than we think. It is the same as investing in something we have not done our research about and did it because others are doing so.
Diversification is unique, there are many takes on it, some say use the formula
110 - age = % of stocks
More conservative portfolios like Ray Dalio's all weather portfolio has a mix of bonds, commodities and equities.
Other portfolios like Bill Gates, Warren Buffett, Cathie Wood, Adam Khoo, Bill Ackman and many more, are fully or mostly into equities only. However, within their portfolio, it is diversified into different types of stocks.
Diversification is important! I’m definitely not against it! But it is very subjective and I’m just trying to point out that even though many seem to say spread it out amongst equities, gold, bonds, that is just one view on diversification. There are many great investors that argue otherwise.
Ultimately, stick with what you have affinity to, know your risk tolerance, financial goals and circle of competence. Becareful investing into something for the sake of diversification if you do not understand much about that market/industry/sector. It may cause us to make poor decisions in times of un-met expectations. i.e. sell when its low only to see it go up tremendously OR buy when its high and take ages to see any returns.
Hi Shawn,
With StashAway, it is important to view the "risk %" as how it changes your actual portfolio rather than a true indicator of risk. See how it changes your portfolio allocation across different markets and assets.
I would like to share a less talked about point on diversification. Over-diversification can expose you to more risk than it reduces.
It is important, as Warren Buffett mentioned, to stick within our circle of competence. Buying into something we do not understand for the sake of diversification can actually expose us to more risk than we think. It is the same as investing in something we have not done our research about and did it because others are doing so.
Diversification is unique, there are many takes on it, some say use the formula
110 - age = % of stocks
More conservative portfolios like Ray Dalio's all weather portfolio has a mix of bonds, commodities and equities.
Other portfolios like Bill Gates, Warren Buffett, Cathie Wood, Adam Khoo, Bill Ackman and many more, are fully or mostly into equities only. However, within their portfolio, it is diversified into different types of stocks.
Diversification is important! I’m definitely not against it! But it is very subjective and I’m just trying to point out that even though many seem to say spread it out amongst equities, gold, bonds, that is just one view on diversification. There are many great investors that argue otherwise.
Ultimately, stick with what you have affinity to, know your risk tolerance, financial goals and circle of competence. Becareful investing into something for the sake of diversification if you do not understand much about that market/industry/sector. It may cause us to make poor decisions in times of un-met expectations. i.e. sell when its low only to see it go up tremendously OR buy when its high and take ages to see any returns.