For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is more risky. Stock X has the lower beta so it is more risky than Stock Y.
Does diversification reduce risk in a portfolio?
Many investors have the misguided view that risk is proportionately reduced with each additional stock in a portfolio, when in fact this couldn't be farther from the truth. There is evidence that you can only reduce your risk to a certain point beyond which there is no further benefit from diversification.
Can you over-diversify your portfolio?
However, some investors may actually become over-diversified. Here's how you can maintain an appropriate balance when constructing your portfolio. Diversification, which includes owning different stocks and stocks within different industries, can help investors reduce the risk of owning individual stocks.
Can You diversify too much in mutual funds?
Over diversification is possible as some mutual funds have to own so many stocks (due to the large amount of cash they have) that it’s difficult to outperform their benchmarks or indexes. Owning more stocks than necessary can take away the impact of large stock gains and limit your upside.
Which 8 hot stocks to buy for your well-diversified portfolio?
8 Hot Stocks to Buy for Your Well-Diversified Portfolio 1 Hot Stocks to Buy: Deere & Co (DE) 2 Dolby Laboratories (DLB) 3 Etsy (ETSY) 4 Logitech (LOGI) 5 Mosaic (MOS) 6 Simply Good Foods (SMPL) 7 Thor Industries (THO) 8 Williams Sonoma (WSM) More ...
Dominion
This premier utility operates in the Mid-Atlantic region with very steady revenue and profit growth, thanks to better demand for power than in other regions.
Consolidated Edison
A major provider of power to New York, New Jersey and Pennsylvania, Consolidated Edison (NYSE: ED) is the most conservative utility within that sector. It’s almost a proxy for a corporate bond when traders speak of it.
General Mills
This best-of-breed food company missed earnings estimates by 3 cents in the last quarter, tempering its uptrend. The stock is coming in to test its 200-day moving average. Given the company’s sound reputation, the stock didn’t give much back. But again, I’m on the hunt for higher dividend yields if the economy is starting to pick up speed.
BristolMyers Squibb
This stock is getting right in the spot where a buy recommendation might be warranted soon. With the rotation out of some defensive sectors under way, the stock has pulled back about 10%. I’m highly inclined to add BristolMyers Squibb (NYSE: BMY) to my conservative portfolio. It currently has a dividend yield of 4.2% — but may get to 5%.
Duff & Phelps Utility & Corporate Bond Trust
I didn’t expect the bond market to rally alongside the stock market this month, but that has been the story, and shares of Duff & Phelps Utility & Corporate Bond Trust (NYSE: DUC) reached to new 52-week high.
Flaherty & Crumrine Preferred Income Fund
Preferred stocks trade much like bonds: They are construed to be fixed-income assets, just junior to corporate bonds and convertible debt when a company is servicing debt payments.
Two Harbors Investment
There’s talk of new government intervention to ease the burden of refinancing more home loans. That would carry the possible risk of massive pre-payment of higher interest rate loans, in turn pinching the already tight spread with which these mortgage REITS are grappling.