Diversification is not a number
For starters, diversification is not just about the number of stocks you own. Buying a fund which tracks Singapore’s Straits Times Index (SGX: ^STI), for instance, will give you a stake in 30 stocks. However, for every S$1,000 invested, around S$454 will go to Singapore’s three banks,...Diversification is either good for you or bad for you, depending on who you ask.
Warren Buffett, the legendary investor and businessman, once said that if you know what you’re doing, it makes little sense to diversify.
But Peter Lynch, a star mutual fund manager of the 1980s, had a different approach.
He believed that the more stocks you own, the better your chances of finding a winner. Lynch was famous for holding up to 1,400 stocks in his portfolio.
Here’s the surprise: they both achieved remarkable success, despite their opposing views.
So, what does this mean for you, the investor? Should you diversify, or not?