Why Diversification Is Failing In The Age Of Passive Investing
Diversification has been the backbone of “buy and hold” strategies for the last few decades. It was a boon to financial advisors who couldn’t actively manage portfolios, and it created a massive Exchange-Traded Funds (ETFs) industry that allowed for even further simplification of investing. The message was basic: “Buy a basket of assets, dollar cost average, and given enough time, you will grow your wealth.”
But where did that marketing revolution come from? Based on the premise of index investing, it created massive firms like Vanguard, Fidelity, BlackRock, and others. For that answer, we need to go back in time to 1952. Then, Harry Markowitz revolutionized investment strategy with his portfolio choice theory. His…
