Diversification

This week’s series of articles is about different ways to diversify your investing and trading.

Many leading traders disparage extreme diversification. For example, Peter Lynch in his book Beating the Street calls extreme diversification “diworsification” in that going to an extreme with it gives you worse results.

The benefit of diversification is avoiding or diminishing drawdown at any given point in time. It’s based on the hope of not having all your investments go down at the same time, hoping that some of them will be going up (while others go down).

With the stock market now in a severe crash mode and with almost all futures/commodity markets going down last week, now seems to be a good time to consider diversification.

continued tomorrow ...

Copyright 2007 Raymond T. Lee. All rights reserved.
Leisurely e-Mini Futures Trading
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