Beware of Little Black Swan in your Portfolio
What does Uncle8888 fear most? Bear or Swan?
Uncle8888 fears that Little Black Swan in his portfolio most.
Some people have been asking him when he is going to add more of this stock or more of that stock. No, no, no once he has enough he is not going to add more. Uncle8888 is terribly scare of keeping a Little Black Swan in his portfolio.
Why did Uncle8888 can't keep buying more of the same stock?
Firstly, he is not so smart. Secondly, he doesn't have deep pocket. When you have deep pocket; your mind is calm and can buy whatever and whenever.
Uncle8888 always like to think of risks before profits and that has been his strategy.
When it is uncertain
When he is faced with uncertainty in the stock market; he will choose to diversify. When you diversify you are actually spreading your risks when you get it wrong. But, when you are right; your rewards/returns will be diluted too.
When more certainty seems to return
When he senses more certainty in the stock market; he will choose to concentrate by trimming those laggards in his portfolio as not all his stocks are expected to recover at the same speed. Some will lead while others will lag.
Diversification across stock and time domain
He will diversify across stock domain by adding more new members into his portfolio and diversify across time domain with his Money Plan. Read? Money Plan
In this way, he will not fear of that Little Black Swan appearing in his portfolio.
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