As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Saturday, 3 October 2009

Portfolio Management - Portfolio Risk

http://createwealth8888.blogspot.com/2009/10/portfolio-management-passive-income.html

Portfolio Risk is composed of the following risks:
  • Systematic Risk or Market Risk
  • Non-Systematic Risk or Non-market Risk

Market Risk refers to the risk common to all stocks and the risk cannot be diversified in the same market e.g. Singapore stock market

Non-Market Risk is the risk associated with the stock of that particular company. Non-systematic risk can be diversified away by holding greater number of stocks in the portfolio.

In Joel Greenblatt's brilliant book, You Can Be a Stock Market Genius, he provides the following statistics by owning the following number of stocks:

  • 2 stocks eliminates 46% of non-market risk of just owning one stock
  • 4 stocks eliminates 72% of the risk
  • 8 stocks eliminates 81% of the risk
  • 16 stocks eliminates 93% of the risk
  • 32 stocks eliminates 96% of the risk
  • 500 stocks eliminates 99% of the risk

Have you done a good job in your Portfolio management to mitigate the Non-Market Risk?

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