Diving into Portfolio Diversification

by | Aug 10, 2023 | Insights

It may be one of the most often-used pieces of advice for a new investor: You need to diversify your portfolio.

This refrain is so common that it could be taken for granted. But in investing, it truly is critical for a portfolio to have enough variety to protect against the inherent risk involved with investing in any specific company. 

When Wayman started investing, our early portfolio was small and focused, and not at all sufficiently diversified. Unfortunately, there were periods of short-term volatility which we felt deeply due to our non-diversified portfolio. 

It can be tempting for new investors to only invest in their best ideas. Wayman was the same way. We still did plenty of research because it was something we loved, and we would follow all the stocks – including the ones we didn’t end up purchasing. What we found is that, sometimes, it took many years for our best ideas to be validated by the market. 

As we gained more experience in the market, we began trusting our instincts and research more. Over time, we decided we were going to purchase all our good ideas and track or hold each to its full potential. 

Using this method, we’ve been able to achieve consistent market-beating returns while avoiding losses and investment FOMO. 

The key to this method is holding the stock until it has maxed out its value for your portfolio. But before you can hold onto a stock, you need to know where to find decent deals. 

Currently, we’re finding the following industries are offering undervalued opportunities in the stock market:

  • Financial Services, insurance and asset management
  • Broadcasting, networks and entertainment
  • Recreational vehicles
  • Commercial real estate

If you’re looking for but not finding the right investment opportunities, subscribe to our value-focused newsletter to go on the adventure of portfolio diversification.