Stock diversification

Which tree do you prefer? 🎄

The market portfolio is a good starting point for any investor. It does, however, leave an investor with quite a concentrated exposure in a small number of companies.

Diversification is a foundational pillar of sensible investing. For the long term investor, taking considered steps away from the market portfolio makes good sense.

Consider the graphic below (it is to scale 🤓). moving from the portfolio on the left to the one on the right we introduce:
⭕ Emerging market exposure
⭕ Modest value and small cap company overweights

In doing so it materially improves stock diversification, whilst maintaining exposure to the world’s biggest companies.

Final

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Stock diversification