Investors often think they have a diversified portfolio when, actually, they don’t.
We know this because our clients sometimes ask us things like, “Why don’t I just invest in the S&P 500?” They seem to believe investing in an index that gives them exposure to a broad selection of assets means they have a diversified portfolio.
But that’s only one of the dimensions of diversification. A good portfolio is actually diversified across three different dimensions: assets, markets and time.
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