The Markowitz line everyone quotes is that diversification is the only free lunch in finance, and Evans and Archer 8-to-10 stock curve is why people stop adding names. Extending your thirty-stock point: owning thirty correlated compounders in the same factor is not thirty independent bets. I care more about what those names share in a drawdown than the headcount.
Very good article. The idea to start out with more stocks and get to know yourself, risk appetite etc is very good advice for people starting out.
Thank you Joe. Much appreciated!
The Markowitz line everyone quotes is that diversification is the only free lunch in finance, and Evans and Archer 8-to-10 stock curve is why people stop adding names. Extending your thirty-stock point: owning thirty correlated compounders in the same factor is not thirty independent bets. I care more about what those names share in a drawdown than the headcount.
That's also a point of the article.
Nice one. Could I also share this on diversification and get your feedback?
cheers
https://valuationbasedinvesting.substack.com/p/what-exactly-is-diversification