Knowing what's out there isn't the same as knowing how much to own. This module covers portfolio construction end to end, how much should be global, US vs rest of world, bonds and commodities, funding, and rebalancing without losing money to taxes.
Diversification removes company-specific risk, the danger that one business fails. It does not remove market-wide risk, the kind driven by interest rates, inflation, or a broad downturn. A well-diversified portfolio still falls when markets fall. Diversification's job was only ever to stop one company or country from deciding your outcome alone.
We discussed earlier that nobody can reliably predict what wins next. A common lapse is heavily favouring the portfolio toward whatever region or sector just performed well, assuming the run continues. It is similar to the point we made about the US specifically: a strong recent track record is not a guarantee.
A fund labelled "world" or "global" can still be heavily weighted toward one country by default. Check what's actually inside before assuming the label did the diversification for you.
We discussed earlier the five criteria for choosing a fund: regulations, costs, issuer, liquidity, tracking error. Optimising for the cheapest option while ignoring the other four can leave you holding something that doesn't behave as expected. Ignoring cost entirely causes the opposite problem, a small, steady drag every year you hold.
When gold has a strong run, the temptation is to keep adding to it, turning a stabiliser into a speculative position, which defeats the reason it was added.
We covered the lump sum vs SIP trade-off. The mistake is picking the mathematically optimal option regardless of whether you can actually stick with it, a lump sum for someone who panics at the first drop, or a SIP so cautious it never gets meaningful money invested.
Rebalancing on a fixed calendar regardless of whether anything has changed creates tax cost for no benefit. Never rebalancing lets a portfolio drift until it's carrying more risk than intended, usually discovered too late to matter.
One question. Less than 10 seconds.
Reinforce what you've learned before continuing to the next chapter.
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