Arbor Asset Allocation Model Portfolio (AAAMP) Blog

AIP Money Management Tips

Over diversification is a serious mistake made by many investors. Some investors have learned the harmful effects of under diversification and mistakenly believe that the more diversification the better. It has become common to diversify to the point of hurting your investment returns. This is particularly harmful in the current environment where the market averages have provided a negative rate of return over the past decade. Too many stocks in a portfolio results in a portfolio behaving similar to market averages.

Most portfolio analysts believe that somewhere between 15 and 30 different assets is optimal to properly diversify away company specific and industry risk. Most institutional vehicles (i.e. diversified mutual funds, pension funds, etc.) are over diversified and simultaneously lack an asset allocation needed for success in today’s challenging market. Many investors have experienced the poor results of over diversification during the past decade.

A properly asset allocated portfolio with optimum diversification requires expertise and excellent research.  The Arbor Investment Planner provides the individual investor with the critical information which allows him or her to properly diversify and assemble an asset allocated portfolio.

Additional reading on Diversification:

“Define Diversification” http://tinyurl.com/2vfl7yj