Diversification has long been one of the bedrock principles of investing but the way most investors think about it is deeply flawed.
That’s according to Chris Carrano, vice president of Venn at Two Sigma, who has been telling InvestmentNews why “true diversification” is often misunderstood, and how a factor-based approach can help investors see what’s really driving their portfolios.
“The conventional understanding of diversification is spreading investments across stocks, bonds, real estate and other asset classes,” says Carrano. “But the problem is that this approach may provide a false sense of security.”
He says that…
