Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
I know that there's a lot of talk in the media about being overweight and underweight in market sectors, and I don't understand why I should care - I'm not trying to match the market.

I think the idea is that there are various forms of risk you expose yourself to when investing in stocks. On one end of the spectrum, a broad index (like the Vanguard whole world - VT) is exposed to world economy risk and index tracking risk. On the other end, PRO is exposed to world economy risk, sector risk, individual company risk, and stock picker risk. Risk managers like to talk about decreasing these as best they can, and from a 30,000 foot level it makes sense to spread your investments across various sectors to mitigate the risk that one sector takes a downturn and inordinately hurts your overall returns.

Personally, I agree that picking good companies trumps sector risk. That said, I wouldn't want a whole portfolio in any one sector. PRO is perhaps a little concentrated for my tastes but with the hedging, cash, and PRO team I'm able to sleep at night. ;)

Dave
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.