Introduction to Personal Investing

The Basics

What is “concentration”?

Concentration occurs when you invest your capital in a few investment classes or one class. The thinking behind this approach for certain investors is if one investment or investing idea is outperforming other investments, perhaps it is a good idea to focus or concentrate your investment in this idea, in hopes of making relatively higher returns. Of course, your acceptance of this concept certainly depends on how much risk to your portfolio you are willing to accept, as a more concentrated investment choice may carry more risk than one that is relatively more diverse. Some investors even believe it is better to decide to invest their money based upon fewer choices or less diversity, as the returns are thought to be higher.


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