My Portfolio is Diversified


There is a looming risk that people think their portfolio is diversified but its probably not.

All the same stocks have high concentrations in mutual funds and ETFs. You can reshuffle the deck of cards however many times, they’re still just the same cards. There is a real risk that you’re portfolio is overconcentrated and you, and possibly your financial advisor if you have one, might not see it.

Different Asset Classes

Even Across Different Asset Classes all correlations spike to 1 during a crisis. Every one of these asset classes, except cash, is severely overbought. ETFs have heavy concentrations as we saw in August. Even low volatility ones.

Diversified by Direction?

You may be under the impression that stocks only go up. Historical evidence certainly corroborates this. But what about a sustained downturn in markets, that don’t rebound like we’ve had since the tech crash and financial crisis. If there’s deflation all assets will go down except for cash. You should consider a higher allocation to cash than you probably have. Currently, cash levels at accounts are at or near all-time lows, so this currently is not the case.

Diversified by product structure? all paper assets, all mutual funds, no

How about by liquidity?


Diversified by Custody/Account Types?

If you have more than $500k, there is a risk that your portfolio will be haircutted if the firm holding your assets gets into trouble. What about money markets? Cash offerings.