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Re: Planning to set up a portfolio
Posted: Thu Jan 28, 2016 4:04 am
by belgo
Thank you Dualstow. I can see now that I actually need the higher volatility of the broader index compared to the lower volatility of dividend stocks to keep the overall volatility of the PP low.
Re: Planning to set up a portfolio
Posted: Thu Jan 28, 2016 3:35 pm
by sophie
Dividend stocks are in fact less volatile - just compare the S&P 500, which is dividend payer heavy, to small caps.
That said, I have started to buy individual stocks for the "deep" part of the stock portfolio (max of 1/3). I haven't really thought about rebalancing, but my idea was that owning directly is a hedge against potential issues with index funds, such as front running. I'm also concerned about having a lot of eggs in a very small number of baskets.
I was thinking to concentrate on dividend stocks for this collection, and compensate by putting an equal part of the stock allocation into a small cap index fund. It's not exactly the path to simplicity though.