44. A Word From Fidelity

An excellent article in Fidelity today: The pros guide to diversification. Readers of this column will be familiar with Fidelity's analysis, but it's interesting to see the accompanying charts they use to illustrate their main points:

• Diversification allows you to reduce risk without reducing returns
• Negative correlation is key: your portfolio should contain asset classes that tend to move in opposite directions
• Periodical rebalancing is required to keep your traget allocations on mark; it may also increase your returns in the long run. 

Unlike me, Fidelity "allows" you to own individual stocks, but warns you against having any stock crossing 5% of the portfolio. This means tracking, researching, buying and selling at least 20 stocks. I find it much easier to stick with index funds and let the day traders and Fidelity experts buy and sell on the news. 

All in all, a great article and great advice. They must be reading this blog :-)