Do you have too many shares in one company?

Feb 08 04:02 2020 Print This Article

Economist and Nobel Memorial Prize winner Harry Markowitz once said that diversification is the only free lunch in finance. In other words, diversification can reduce risk and volatility with no cost or reduction in returns.

That is not to say that someone may not get lucky by buying a single stock or having a large part of their investment portfolio in one investment. It is just that the odds of investing successfully increase by diversifying.

Most academic research suggests at least 10 stocks are required to achieve diversification, with some suggesting up to 40 stocks or more. What this means is that by adding an additional holding, the incremental diversification is small.

Exchange-traded funds (ETFs) generally have even more holdings. The largest Canadian ETF, iShares S&P/TSX 60 Index ETF (XIU), tracks 60 stocks. The largest ETF in the world, SPDR S&P 500 Trust ETF (SPY), tracks 500 stocks.

Read More

About Article Author

Money Sense

MoneySense is a Canadian personal finance and lifestyle magazine published by Rogers Publishing Limited, a division of Rogers Communications.Written for Canadians who want to take financial control of their lives, MoneySense is Canada's best-selling investment and lifestyle magazine, helping readers make smart, informed decisions about how to get the most from their money. The magazine has received many awards, including multiple National Magazine Awards and CFA Society Toronto Awards.

Related Items

How To Buy Bonds

Over time, bonds should find a place in your portfolio. How much you should have will definitely depend on your investment strategy and appetite for market swings. If you are in the market for bonds, you can get in on ... Read more ...

Market Update: Investors Optimistic as Global Economies Reopen

The quickest bear market in the history of the US S&P 500 turned into the best 50-day bull market rally in history in May. By market close on June 3, 2020, the S&P 500 Index was up 37.7% from its March 23, 2020 low. This bullish investor sentiment has been based on the continued decline in new coro ...

Top Funds' Activity in Q1 2020

Jason Orestes of The Street reports Amazon is clearly what hedge funds are betting on these days:Amazon has been a major beneficiary of the Covid-19 chaos, and hedge funds have taken notice.The fastest bear market in history saw a 30% plummet followed by a rapid 30% rebound. But there has been a l ...

Filing your clients’ 2019 taxes: what’s new and noteworthy

The Thursday, April 30 tax filing deadline for individuals is coming up fast. Here’s a summary of new limits, new rates, tax changes and new services. Tax filing season is upon us, and the first thing to note is the filing deadline: Thursday, April 30. For business owners and their spouses, the t ...

CAAT Pension Plan Gains 16% in 2019

Yaelle Gang of the Canadian Investment Review reports that CAAT pension plan returns 16% in 2019, well-positioned to weather coronavirus storm:The Colleges of Applied Arts and Technology pension plan saw a strong 2019, delivering a 16 per cent return, net of investment management fees, while growin ...

Making the most of volatility in these uncertain times

In our last article we discussed how to reduce the risk associated with the time-value decay of options in a directional position. Now we will take advantage of the market meltdown to discuss the implied volatility in the price of an option, how it reflects the degree of market uncertainty over fut ...

Precipitate Gold $PRG.V $PREIF Adds Major Barrick Gold $GOLD as Shareholder

Precipitate Gold Corp. is a mineral exploration company focused on exploring and advancing its mineral property interests in the Pueblo Viejo Mining Camp and Tireo Gold Trend of the Dominican Republic. Precipitate is also actively evaluating additional high-impact property acquisitions with the pot ...

IMCO's Big Stake in Apollo's New Fund

Christine Idzelis of Institutional Investor reports that Apollo took just two months to raise a credit fund that seeks to profit from tumultuous markets — and it got a swift and significant contribution from Canadian pension manager IMCO:When Apollo Global Management approached the Investment Man ...

Biggest Gold Asset in S. America Got New CEO with Great M&A Record

During this quarantine I have been blessed to speak to some extremely successful entrepreneurs in the mining sector.  It has been during this pandemic crisis that opportunities arise for astute investors who can think quickly.   Many smart investors who left the mining sector to real estate, cann ...

A deep retrofit of homes and buildings is the megaproject Canada needs

Ramping down carbon emissions from homes and buildings can help us rebuild Canada’s economy after the pandemic. ...

Episode 3: Can We Prepare Our Communities for the Future of Work?

As the labor market goes through an evolution that started long before the pandemic, our communities are being transformed as well. In many cases that means good things, as when successful companies hire and prosperity increases. Other times there are less-positive spin-offs, with some people being ...

Gold About To Breakout $1800

It was 2008 and we were in the middle of the Great Financial Crisis.  At the time I was working as a math teacher with a small family.  I was already investing in junior gold miners for 10 years before I took the plunge to go full time into becoming a mining entrepreneur leaving a secured tenure ...

Stat Arb, Algos and the Difference Between Cats and Dogs

A co-founder of Quantigic Solutions has presented what he calls “the freshmanlevel” answer to the question: why did dollar-neutral quant trading strategies, such as equities stat arb, fail so markedly during the COVID-19 market sell-off? Zura Kakushadze, a professor at the Free University of Tbl ...