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While the basic argument that the standard deviations of the annualized returns decrease as the time horizon increases is true, it is also misleading, and it fatally misses the point, because for an investor concerned with the value of his portfolio at the end of a period of time, it is the total return that matters, not the annualized return.
Diversification across companies: Even within niche industries, performance can vary wildly depending on company size (large- or small-cap), maturity (IPO vs. blue chip stock) and business focus ...
It measures the ratio of a distribution's percentage of total variance from returns above the mean, to the percentage of the distribution's total variance from returns below the mean. Thus, if a distribution is symmetrical ( as in the normal case, as is assumed under MPT), it has a volatility skewness of 1.00.
Diversification may allow for the same portfolio expected return with reduced risk. If all the asset pairs have correlations of 0 — they are perfectly uncorrelated — the portfolio's return variance is the sum over all assets of the square of the fraction held in the asset times the asset's return variance (and the portfolio standard ...
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For the real-money Inflation-Protected Income Growth portfolio, last week meant a small net decrease in value of $182.17, or about 0.5%. Topping The Magic of Value and Diversification
A fundamental justification for asset allocation is the notion that different asset classes offer returns that are not perfectly correlated, hence diversification reduces the overall risk in terms of the variability of returns for a given level of expected return. Asset diversification has been described as "the only free lunch you will find in ...
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