The resurrection of diversification

DIVERSIFICATION

As uncertainty is resolved about the severity of the crisis, and as liquid capital returns to the markets working to drive differences in risk pricing, expect to see the return of diversification

Despite the significant increase in short-term correlations witnessed in 2008 and early 2009, the long-term benefits of global diversification remain and are returning. There are a number of considerations for investors seeking to implement a diversified strategy. The concept of diversification Modern Portfolio Theory (MPT) has developed the common sense concept of not putting all your eggs in one basket into a core principle of efficient portfolio management. In essence, MPT states investors can gain efficiency by diversifying their portfolio across a range of asset classes that displ...