Invest
The Irrelevance of Time Diversification
By (The) Boring Investor  •  July 19, 2013
Time diversification is the holding of an investment over a long period of time and thereby achieving a diversification of annualised return over time. It is often said that time diversification helps to improve your investment returns. At one point in time, I was an ardent fan of time diversification. However, after thinking further about it, I realised that time diversification, while not totally irrelevant, is quite irrelevant. Let's take a closer look on the case of time diversification. Using the historical returns of the Straits Times Index from end-1984 till end-2012 as the base data, we can construct the annualised return over different holding periods.
Annualised Returns Over Different Holding Periods
As can be seen in the figure above, the annualised return over a 1-year holding period can vary greatly from +78% to -49%. Anybody holding shares during the worst 1-year period would have suffered a great loss. Over ...
...
Read the full article
By (The) Boring Investor
nvestor, Engineer, Photographer, Blogger, Friend and Son.
LEAVE A COMMENT
LEAVE A COMMENT

Your email address will not be published.

*

Your Email Address will not be published
*

Read More Articles
More from thefinance