John Baron's Investment Trust Portfolio 

Diversification and correlation

Diversification and correlation

When this column last touched on the subject of diversification a year ago, the case for selectivity was made when choosing asset classes given central bank policy had increased the correlation of some assets hitherto considered appropriate – their efficacy was in doubt. The merits of cash were explored. Last month, in being ever vigilant when seeking to protect accrued gains via diversification, the portfolios’ exposure to commodities was significantly reduced – ‘correlation’ was once again the reason.

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