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Diversification at the Core

March 22, 2012 Comments off

Pinning down the origin of the saying, “don’t put all your eggs in one basket” is surprisingly difficult. Some say it’s an ancient Chinese proverb. Some attribute it to American author Mark Twain, or Spanish writer Miguel de Cervantes. It’s a simple saying, one you might expect to find cross-stitched onto a pillow, but don’t let its ubiquity fool you: there’s wisdom in those words.

The late Sir John Templeton was certainly a champion of diversifying one’s “basket” of investments. And so is Tucker Scott, portfolio manager for Templeton Global Equity Group. Diversification is at the core of his investment strategy. A summary of his recent remarks: 

Tucker Scott

  • We try to find stocks that we believe are undervalued, then build a portfolio that’s well-diversified by industry and by country
  • We try to limit position sizes in an attempt to help limit potential stock-specific risk
  • We don’t look to an index as a guide to desired weightings; we rely primarily on internal research
  • The primary area where we’ve been purchasing stocks in Europe is the financial sector
  • The core European countries appear to be in a healthy state; we think the European “project” should continue Read more…
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