Clarifying True Diversification

Discussion in 'Trading' started by Chuck Krug, Oct 6, 2016.

  1. Diversification is for people, or traders, who are horrible at what they do...and should just be longer-term investors. -- which this forum is not what's about :):sneaky:
     
  2. d08

    d08

    Absolutely false. Every strategy has it's breaking point (where drawdown approaches catastrophic levels), only diversification can help you trade big size without these catastrophic drawdowns. If you were about to say "I don't have catastrophic drawdowns" then you haven't traded long enough. Go and look what happened between 2000 to 2002 when the market was nothing like it is now.

    No strategy, no matter how good, would be equally profitable across all months and diversification will greatly improve the Sharpe and will dramatically increase return.