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Why investors should diversify differently

Out with the old formula

By Andy Davis   November 2020

Image: Pixabay

Diversification is the only free lunch in investing. Although some, including legendary investor Warren Buffett, denigrate this well-worn idea, for most it’s a no-brainer to seek to balance risks by spreading them across a range of investments. When some prices fall, others should rise to help keep our wealth on a reasonably even keel.

This principle lies behind the classic 60/40 portfolio: 60 per cent risky shares and 40 per cent ultra-safe government bonds. For decades, this balanced portfolio has offered decent risk diversification—when…

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