What Australian investors need to know: To Diversity their portfolios

Publication Type:
Journal Article
JASSA, 2013, 2013 (4), pp. 14 - 20
Issue Date:
Full metadata record
An ASIC survey in 2008 showed that Australian investors do not diversify their portfolios sufficiently, with the average investor holding only 2.19 securities. To study this issue, we simulate portfolios using daily observations for all traded and delisted equities in Australia between 1975 and 2011. We calculate two measures of risk, including heavy tailed distributions to account for extreme events. For each risk measure, we recommend the number of portfolio holdings that result in a 90 per cent reduction in diversifiable risk for an average and a more conservative investor. We find that, on average, 24 to 30 stocks are sufficient to attain a well-diversified portfolio.
Please use this identifier to cite or link to this item: