SUMMARY

Conventional wisdom suggests that a diversified portfolio is more advantageous to investors. Yet, some consider concentration to be an attractive approach if used responsibly. Indeed, many respected investors manage a highly concentrated portfolio because they believe it will support their long-term return goals. However, highly concentrated portfolios often result from unconscious investment decisions. This may imply that a portfolio composed of a single asset can introduce risks for an investor, namely volatility, which represents a significant cost to portfolio growth over long periods. In this white paper, Jack Tobin, Research Associate, and John Raus, Senior Research Analyst, share their analysis that suggests selling the single asset position and reinvesting the after-tax proceeds in a diversified portfolio is expected to generate a higher portfolio value at the end of the long-term investment horizon.

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