diversification

What is diversification?


Diversification involves the planned distribution of investments across various securities to minimize the risk exposure to a specific industry or geographic segment. However, the risk of over-diversification exists, in which an investor can at best expect to mirror the market returns, minus any brokerage fees or management expenses.


On the surface, ETFs that invest in the same universe of stocks may be expected to deliver a similar performance. However, ETF managers use different methods to construct their portfolios—and this can lead to vastly different performance outcomes.



Market cap weighted ETFs


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A: Black Diamond Group, $1.34, symbol BDI on Toronto (Shares outstanding: 55.6 million; Market cap: $72.8 million; www.blackdiamondlimited.com), rents and sells modular buildings and temporary workforce accommodations to customers in Canada, the U.S., and Australia....
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Visa’s shares dropped as much as 38% in the recent market downturn—from the record high of $214 hit in February 2020 to as low as $134. But the stock has rebounded to today’s price and is now down just 15%.

The recovery reflects renewed investor confidence, for a number of reasons, in Visa’s strong long-term outlook.

The COVID-19 crisis will hurt the company, of course....
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