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Is diversification worthwhile?

7 juillet 2014

This issue of "Investorama" looks at the subject of diversification as well as the outlook for the current bull market. We also take a closer look at inflation – which appears to have been completely forgotten at present, but is still worth keeping in mind.

A portfolio investing half its assets in equities and the other half in government bonds from industrialized countries would have posted high returns in recent years. Portfolios including additional asset classes would have had difficulty in keeping pace. Will this pattern continue? Can we do without broad diversification altogether in the future?

The principle of diversification is as old as mankind itself. In ancient China, traders divided up their goods among different ships so as to reduce the loss if one of the boats should sink while negotiating treacherous waters. Nevertheless, the principle of diversification is now coming under close scrutiny, and not without good reason. A portfolio investing half its assets in equities and the other half in government bonds from industrialized countries would have posted high returns in recent years. However, portfolios including additional asset classes would have been scarcely able to keep pace, if at all.

Inflation – not to be underestimated

In our interview, Sven Lang, a fixed-income expert at LGT Capital Partners, explains why the latent threat of inflation must not be overlooked. 

Meanwhile, our money tale looks at why Switzerland is a good place for storing data securely.  And finally, in “The number” we tell you what 256 has to do with data security and how it is linked to 13,800,000,000.

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