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kn · 08-15-2012, 10:33 AM

I'm reading varied thoughts on what is sufficient diversification. Is there such a thing as too much diversification?

Benjamin Graham, who wrote several books and was the mentor to Warren Buffet, suggests in the "Intelligent Investor" that a representative list of 30 blue chip companies is sufficient diversification for the defensive investor.

I've read articles profiling average Canadians who've made a successful retirement portfolio by juggling no more than 10-12 stocks.

Scott Burns, one of the early advocates of passive investing, shows how following an indexed strategy of 50% bonds and 50% in a fund tracking the S&P 500 is all you need:
http://assetbuilder.com/blogs/scott_...-investor.aspx

MoneySense magazine, which just released the "Guide to the Perfect Portfolio" suggests index funds or ETFs covering a minimum of four asset classes - Canadian bonds, Canadian equity, US equity, and International equity. Within each of those equity funds are thousands of companies. If you add emerging markets or commodities, or pick a fund that attempts to cover the "Total Stock Market", you're probably dealing with over 10,000 companies.

The opposite (as far as ETFs are concerned) is DIA which covers the 30 companies making up the Dow and XIU which covers the top 60 companies on the TSX:
https://www.spdrs.com/product/fund.seam?ticker=DIA
http://ca.ishares.com/product_info/f...erview/XIU.htm

For a long-term buy-and-hold strategy, would investing in these two funds be sufficient? You're still investing in 90 companies, something virtually impossible to do directly.

I think I'm reaching the point of information overload and paralysis by analysis in determining how I want to structure my portfolio.

08-15-2012, 10:33 AM	#1
kn #1 Goaltender Join Date: Dec 2002 Location: Calgary Exp:	Portfolio Diversification I'm reading varied thoughts on what is sufficient diversification. Is there such a thing as too much diversification? Benjamin Graham, who wrote several books and was the mentor to Warren Buffet, suggests in the "Intelligent Investor" that a representative list of 30 blue chip companies is sufficient diversification for the defensive investor. I've read articles profiling average Canadians who've made a successful retirement portfolio by juggling no more than 10-12 stocks. Scott Burns, one of the early advocates of passive investing, shows how following an indexed strategy of 50% bonds and 50% in a fund tracking the S&P 500 is all you need: http://assetbuilder.com/blogs/scott_...-investor.aspx MoneySense magazine, which just released the "Guide to the Perfect Portfolio" suggests index funds or ETFs covering a minimum of four asset classes - Canadian bonds, Canadian equity, US equity, and International equity. Within each of those equity funds are thousands of companies. If you add emerging markets or commodities, or pick a fund that attempts to cover the "Total Stock Market", you're probably dealing with over 10,000 companies. The opposite (as far as ETFs are concerned) is DIA which covers the 30 companies making up the Dow and XIU which covers the top 60 companies on the TSX: https://www.spdrs.com/product/fund.seam?ticker=DIA http://ca.ishares.com/product_info/f...erview/XIU.htm For a long-term buy-and-hold strategy, would investing in these two funds be sufficient? You're still investing in 90 companies, something virtually impossible to do directly. I think I'm reaching the point of information overload and paralysis by analysis in determining how I want to structure my portfolio.