The Importance of Global Diversification

An investor’s ability to achieve their investment goals often relies on maintaining discipline in their portfolio over the long term. Diversification across securities, sectors, and countries can help investors maintain their focus, potentially allowing them to avoid extreme outcomes that may result from a more concentrated approach. However, short-term performance of individual markets may cause some investors to question the merits of diversifying across countries and consider reallocating to markets that have recently done well. In these times, it’s important to be reminded of the benefits of maintaining a globally diversified portfolio.

“Diversification is about the closest thing to a free lunch in capital markets, so you may as well get a huge helping of it.”
Ken French

 

“Diversification has one drawback: You will not be concentrated in the winner. But who can guess the winner all the time?”
Eduardo Repetto