Is Diversification Enough for Adding Value to Investments?
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Get full access to all Data Science, Machine Learning, and AI courses built for finance professionals.
One-time payment - Lifetime access
Or create a free account to start
A step-by-step guide covering Python, SQL, analytics, and finance applications.
Or create a free account to access more
Most money managers primarily focus on security selection (diversification) as the only source for adding value to their investments. However, recent turmoil in the market and its impact on wealth as shown that this over-dependence on diversification may not be enough.
Apart from diversification, there is another important factor, i.e., risk management, which must be focused upon.
In this article from The Journal of Portfolio Management, the authors build the case for the importance of risk management, the three misconceptions because of which t is neglected, and what risk diversification can and cannot deliver.