In this week’s #tfpforall we try and understand the very basic concepts of Wealth Management, day before yesterday we discussed ‘Asset Allocation’. In case you missed it, click here to check it out. Today we try to understand what is Single Stock Diversification.
Single stock diversification is seldom spoken about and people don’t consider it either!
Diversification is on every investor’s mind while preparing a portfolio. The number of stocks and sectors have been a very ambiguous topic in the minds of individuals as well as portfolio managers.
However, there are many companies (individually) diversified into so many sectors that they by themselves offer diversification.
Take for example Reliance Industries (RIL) which is diversified into so many sectors from petroleum to textile to telecommunications, that even in such times it has bounced back almost 80 odd per cent from its 52 week lows it touched March end, even when its primary business of petroleum has been taking up severe hits because of volatile oil prices. It is one of the top 5 gainers in the world and the only Asian company in the list.
Another example can be of banks who have their exposure to various sectors and companies and thus their lending book can be studied to understand how and which sectors are they diversified into.
Can you think of other such examples of companies which can provide such diversification? Leave your thoughts in the comment section below.
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