People always say diversification in stocks buying is important. But should I diversify across countries, industries, or nature of business (startups, big firms)? Any thoughts?

Answers from the panel!

Ser Jing (The Good Investors): Yes, diversification could be across countries, industries and nature of business. But diversification also has to be smart. If you want to diversify across industries, you should only be looking at industries that have attractive characteristics for long term investment. Such companies should have pricing power. If you are looking at industries like shipping or oil and gas, such industries basically have zero pricing power most of the time, and over the long run are not able to grow much or if at all. When diversifying across geography, you should consider the stability of the politics and economy of the country. Diversification across the nature of business is interesting because in the stock market you typically don't get to invest in startups. You can get to invest in really young, high growth companies, so in a well constructed portfolio there's place for big giants and more speculative type of companies, provided they are weighted correctly.

Stanley (Value Invest Asia): We should not diversify just for the sake of diversifying. You should only buy into a certain company or industry that you are more optimistic about.

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If you have so much funds to do such diversification it'll be good. But usually diversifying in different sectors should be sufficient. And also a balance of SG and US stock should be fine.