Why We Diversify
by Eddy Elfenbein, Crossing Wall Street
On Friday, Microsoft (MSFT) dropped 7.17% thanks to its earnings report. Personally, I didn’t think the earnings report was that bad but I’ve learned that it’s hard to argue with a market that’s out for blood.
Despite the big hit from Microsoft, I was pleased to see that our Buy List slightly outperformed the market on Friday. This is a good lesson on why diversification is so important.
Roughly speaking, MSFT was a 36-basis-point drag on the whole portfolio (7.17% divided by 20; that’s not exact but it’s good enough for our purposes).
On Friday, the S&P 500 gained just under half a basis point so it rounds to being flat for the day while our Buy List gained 0.03%. A strong portfolio is like a well-rounded sports team — on any given day, you’ll never know who the hero will be.
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