Does ‘adding’ a riskier position to a portfolio actually REDUCE the total portfolio risk?
The fact is many investors are often their own worst enemy. The media gurus – usually selling their own DVD sets – have succeeded in focusing on fees and expenses (something they’re correct in doing) to the exclusion of any possible value (something they’ve been successful in doing to the point of dereliction). The unfortunate result has been many portfolios that are scattered vs. diversified (as this Morningstar chart depicts) and too conservative to the point of being risky.
But, risk is a concern! However, it is often possible to reduce risk by actually adding a riskier position. The key lies in understanding investment correlation.
You might find this short report helpful; just click on the button below.
Adding Risk Report