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Diversification, De-Risking and Other Thoughts

Published on: Apr 06 2015

Investors are very nervous about owning stocks these days, but they also don’t want to miss out on a continuation of the bull market. If that describes you, and you’re not sure what to do, consider this article. It’s written primarily for institutional investors (pension funds and such) and might seem to ramble a bit. But it is easy to read and might help you sort out thoughts about what to do with your portfolio now. It’s important contributor is to emphasize that there is a diversification between regular diversification and de-risking a portfolio.

The question is … what diversification strategies can move your portfolio into this promised land? Also (as if this weren’t a challenging enough task already), what diversification strategies can work quickly enough to satisfy a de-risking calculus? Diversification can take a long time to prove itself, and that’s rarely acceptable to investors who are seeking the immediate portfolio impact of de-risking, whether it’s the bear market or bull market variety.

What we need are diversification strategies that can act quickly. More to the point, we need strategies that can react quickly, all while maintaining a full head of steam with their gross exposure to non-correlated or negatively-correlated return streams. This is at the heart of what I’ve been calling Adaptive Investing.



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