10 Feb 2015

The Wrong Kind of Diversification

Some kinds of diversification are better than others. Legendary investor Peter Lynch often referred to corporate ‘deworseification’ back in the conglomerate days when companies like ITT owned businesses as varied as hotels, insurance, defense contracting and for-profit education. One kind of diversification that Morningstar has popularized, but that I don’t think is particularly useful, is diversification by style box. As you can see in the image, Morningstar has cut the… Read More

By David Ott Tags:
11 Sep 2014

Avoid This Catastrophic Loss

Every now and then, I come across some research that really drives a point home. Yesterday, I found a terrific study by JP Morgan on what they called catastrophic losses – or what kids today might call ‘epic fails,’ which Urban Dictionary defines as: a complete and total failure when success should have been reasonably easy to attain. In the JP Morgan study, a catastrophic loss is defined as a… Read More

By David Ott Tags: ,
28 Aug 2014

Diversification or Di-worse-ification?

As I described yesterday, the S&P 500 is on a hot streak this year, up 9.68 percent so far this year through yesterday. I should also note that outside of REITs (which I mentioned a few days ago) and Emerging Markets, the S&P 500 is the hottest thing going this year. Given that REITs and Emerging Markets are relatively small portfolio weights, you might not be feeling the benefit from… Read More

By David Ott Tags: ,