9/14/21, 4:54 PM
The Benefits of a Concentrated Portfolio | Matthew Littlemore | Finance Blog
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The Benefits of a Concentrated Portfolio by matthewlittlemore | Sep 14, 2021 | Blog, Finance, Matthew Littlemore
The concept of index investing goes back more than 40 years. Since its debut, there has been a constant debate between active equity management and more passive styles. Most money managers can’t beat the markets consistently, leading many investors to index their investments. On the other hand, some investors do beat the market regularly. There can be concentrated portfolio benefits for some. The mantra of many financial advisors over the years has been preaching the benefits of diversification. For a broad investment strategy, mainly when saving long-term for retirement, this does have benefits. Proper diversification does allow investors to capitalize on the growth of specific sectors while planting seeds in down-turning industries so they can reap the benefits of their eventual development. Over time, exposure to every primary asset class yields the best results in a balanced and safe manner. However, things may have gotten over-diversified, with many investors just turning to index funds that track the entire market at once. Index funds do make following market success much easier to do since they mimic the spread of the overall market they are pegged to. Since individual stocks are not traded all that much, there aren’t as many fees. Also, computerized control and hands-off management mean there are fewer commissions to pay along the way. Concentrated portfolios do have their place when representing portions of a broader investment scheme. While a diversified portfolio might have 60 percent or more of its assets put into the https://matthewlittlemore.net/the-benefits-of-a-concentrated-portfolio/
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