MICHEL PIREU: Following clear-cut investing rules can help overcome risk
Analysts have mixed views on diversification but agree on the need for a steadfast strategy
Diversification is the only free lunch in investing," said Harry Markowitz. "In my 45-year career as an investment counselor, humility did show me the need for diversification to reduce risk," says John Templeton. But not everyone agrees. "Wide diversification is only required when investors do not understand what they are doing," counters Warren Buffett. "If it’s your game, diversification doesn’t make sense. It’s crazy to put money in your 20th choice rather than your first choice." US investor George Gilder says: "Much of the market is mindlessly indexed. That means it is all beta." An asset’s exposure to unsystematic risk is measured by its beta, indicating whether it’s more or less volatile than the market. Volatility is measured as the fluctuation of the price around the mean. But not everyone’s a fan of that concept either. John Szramiak at Business Insider thinks it’s a ludicrous concept. First, because beta uses market prices to measure risk, instead of using fundamentals. ...
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