Chapter 6 of 10All chapters
Chapter 6 of 10
Diversification
The one free improvement.
How much is enough
Most specific risk disappears after twenty or thirty holdings spread across industries and countries. Beyond that the benefit flattens quickly.
- A broad index fund achieves this in one purchase.
- Twenty companies in one sector is concentration wearing a disguise.
Across asset types
Shares, bonds and cash respond differently to the same conditions. The mix between them shapes the risk of a portfolio far more than the individual choices within each.