How to make your portfolio work for all seasons

Diversification for protection is an old idea. Around 2,000 years ago the Talmud recommended dividing money into three parts and investing a third in land, a third in business and keeping a third in reserve. This early example of a balanced portfolio is remarkably modern in conception because it emphasises that the diversification of risk should take precedence over the maximisation of return. Diversification by number Let us begin with one asset class. In 1977, the Journal of Business published a paper by Elton and Gruber. They used 3,290 shares to randomly create equal sized portf...