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New Diversification

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New Diversification

Introduction

This article was posted on Tuesday, 10:47, UTC.

One of the keys to sustainability in any investment is diversification. Even if you’re dealing with extremely risky assets, just having an even mix of them is enough to bring your level of risk down drastically.

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This is why index funds and ETFs work so well. They invest in lots of different assets within a specific sector so as long as that part of the economy keeps growing at a normal pace, you’ll see decent returns.

After the recent “Tech tantrum” that saw the Nasdaq fall 238 points in a single day, investors want to take this opportunity to find out how to strengthen their respective portfolios.

Mostly, what they’re finding is that the big tech names have been dominating investment portfolios. Such that a single investor may have lots of different investments that all hold the same four stocks as their main holding.

For clients in eToro who have many different types of investments in copytrading and copyfunds, Every once in a while, it pays to check for unnecessary correlations in your portfolio. You can do this quite simply by using the portfolio pie chart, which is available at this link: etoro.com/portfolio/chart/

Take a look at your allocation and risk. Let me know what you find.

Mati Greenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of June 20th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Wall Street is celebrating the return of the tech stocks after their recent fall and are now booking in new record highs for the Dow Jones and the S&P 500.

This as volatility remains near all time record lows.

Watch out for China?

The MSCI has a lot of ETFs in it, most of them are quite stable and steady. One, that is specifically for emerging markets will face a big decision today.

You can find the index at: etoro.com/markets/eem

The decision is simple, whether or not to add stocks from mainland China inside this index. Chinese stocks have been performing well lately, so adding them into the diversification pool could be seen as a good thing.

However, Chinese stocks have a way of reporting back to the Chinese government, who tends to exert a certain amount of pressure on the companies themselves. They also are exposed to currency risk related to the Renminbi.

“I think that this would not be a good decision for the MSCI to make. Adding these Chinese stocks may be good in the short term but it will make the entire index more risky for long term investors.”

Macy Ma
eToro, China Analyst

Bitcoin Scale-ability

The big debate about bitcoin may be coming to a head. A solution that was agreed on in New York called, you guessed it, the New York Agreement has recently reached a milestone of 70% of miners who agree to implement it. Once 80% consensus is reached, the protocol will begin locked and loaded and begin to take effect.

The idea is similar to the segwit solution that was implemented on Litecoin recently and hopefully will be strong enough to process 8000 to 10,000 transactions per block in the chain.

The great news is, that if this happens, the hard fork will likely have no impact on regular bitcoin users. The main bitcoin that we know today will continue to exist as normal, and any miners who did not signal for segwit2x will be forked off the network.

The price of Bitcoin is reacting nicely to this news and is up up up today. If we see a break above $2,700, we could certainly see a fresh wave of interest from all sorts of new and old investors.

This is going to be interesting to watch. Wishing you an amazing day ahead!!

This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.

Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



Feedback or Requests?

Mati Greenspan

Mati Greenspan

https://www.etoro.com/

Senior Market Analyst at Etoro.com.

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