Diversification at Work!

October 6, 2004 — 2 Comments

US Stock funds with diversified positions lost 2.76% percent in the third quarter, based on preliminary figures from fund-research firm Lipper.

A portfolio of globally diversified stock funds (Long-Term Component by Quality Asset Management – QAM) achieved positive returns of 3.58%. If you are thinking that sophisticated prediction of the quarter was involved, you are giving too much credit to Dimensional Fund Advisors (the mutual fund company) or QAM. These are mutual funds that hold over 6,000 companies throughout the world, representing the different asset classes. Similar to index funds, they include all stocks that fall into set criteria that define the asset class, with no preference to one over the other.

What is the secret, then? Simple global diversification. As you can see in the chart below, different asset classes went up at different times. Specifically, emerging markets showed high returns, while international stocks went slightly higher, all which offset the negative performance of US stocks for the quarter.

2004-10 Q3Graph

Disclosures Including Backtested Performance Data

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Gil Hanoch

Posts

2 responses to Diversification at Work!

  1. When I initially left a comment I seem to have clicked on the -Notify me when new comments are added- checkbox
    and now each time a comment is added I get four emails with the exact same comment.
    There has to be a way you are able to remove me from that service?
    Thank you!

    • I am sorry you got trapped with notifications you didn’t want. I couldn’t replicate your problem – I didn’t even have the option to notify me on future comments, but maybe it’s because I’m the owner of the site. Here are two ideas:
      1. Post another comment, and uncheck the “notify me .” box. Hopefully, that will cancel all new comment notifications on this post.
      2. See if you have an option to modify your subscription options, from within one of the emails that announced to you the comments.
      Please tell me if you still couldn’t figure it out.
      Thanks,
      Gil

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