Analyzing the makeup of your portfolio
As we learned from Markowitz, the basis of constructing any portfolio should be proper diversification. In practice, this typically means diversification along multiple dimensions of potential investment products, such as the following:
- Asset class: This is just a way to separate different types of investible assets, the classics being stocks, bonds, and commodities. One can get as granular as one likes, of course. While regulations currently limit the inclusion of cryptocurrencies, which seem a likely addition to future portfolios sooner rather than later.
- Asset region: Another popular method of diversification is to choose investments from different countries. Typically, one would have varying degrees of exposure to the main market groups such as America, Europe, Asia, and an evolving group named emerging markets.
- Asset industry: Given the humongous impact of tech stocks in recent decades, it makes sense to diversify into other...
