Bubblesofearth wrote:Wizard wrote:
The first sentence tells us that Doris' portfolio had not behaved like HYP1 has, it remained diversified. If this was not the case surely the sentence would have referred to it being well diversified at the time of selection (from the article I think it is clear Stephen Bland would have had no insight into the level of diversification at purchase, he only knew the portfolio from the time he started to do Doris' tax returns many years later). Indeed, if that had changed surely it would have been worth mentioning in the article that that diversification had been watered down over the forty years Doris owned the portfolio. So I think it is pretty clear that the article was telling this portfolio retained its diversification.
I believe my conclusion above is confirmed in the second highlighted sentence. If Doris' portfolio showed the imbalance that HYP1 does I can not see how it could be described as relatively low risk.
So whether the story was fact, fiction, or a bit of both, what we are told is that Doris had a portfolio that was initially well diversified and remained so after over forty years. In that situation I can see why nobody would worry about 'tinkering' with the portfolio. But that is not how HYP1 looks after half that time. My guess is that PYAD did not expect HYP1 would ever look anywhere near as unbalanced as it does now when it was first selected.
If diversification was maintained by tinkering then how is this possible, and who did it, if Doris had no desire to get involved? I think you are drawing conclusions to fit your opinion rather than as supported from the statements.
On the second point I do not agree that a portfolio cannot be low risk just because there is imbalance in share holdings. Is the Vanguard World tracker high risk because of the weighting it has to a few shares such as Apple?
On the whole issue of the risk of a portfolio that equal weights across shares and sectors and is then left alone I would throw the following challenge - show me one that has failed. Every study I've seen, Doris, HYP1, studies of the original Dow components or my own experience has confirmed my belief that the approach is sound.
You diversify on purchase precisely because you know some shares will do better than others! Thats how portfolios and markets evolve. Why incur an endless succession of charges to try to maintain equal weightings when there is no evidence to suggest it helps overall performance. Again, if there is evidence, let's see it.
BoE
I never suggested anyone tinkered with Doris' portfolio. What I suggested was it remained well diversified without tinkering, hence why I said it had performed differently to HYP1. I think the language used makes it hard to conclude anything else. As far as I can see, the alternative is this part of the story was not factual, as per the opening paragraph.