Quote Critique

“Don’t put all your eggs in one basket.” – (Market maxim)

“Put your eggs in one basket and watch the basket.” – (An alternate strategy)

The first quote touches on the necessity of diversification, but the second approach has a more realisitc attitude towards investment.  Diversification is a wonderful thing, but it entails more than owning various asset classes with historically low covariance.  Though I have a keen interest in uncorrelated positive return ETFs like IWN, IYR, EEM, DBC and PLW, there is more to risk management than buying and holding into perpetuity.  It is important to reduce risk via dynamic position sizing in order to reflect market conditions.