While some risks in investing are inevitable, others can be mitigated through prudent strategies and disciplined practices. One such risk, known as unique risk, stems from the potential volatility associated with individual companies’ fortunes. This risk can be reduced by diversifying, spreading investments across a range of different securities.
At Byrne Asset Management, we prioritize diversification not only to limit exposure to any single company but also to mitigate sector-specific risks. While it typically takes a portfolio of 20 to 30 stocks to significantly reduce the volatility associated with individual firms, overlooking sector and sub-sector concentrations can leave portfolios unduly vulnerable. We are diligent.
For small accounts, we may utilize low-cost index exchange-traded funds (ETFs) to achieve broad market exposure. Additionally, we may incorporate sector-specific and international ETFs to gain diversified exposure to desirable sectors and countries.
Moreover, if a client has significant exposure to a particular company due to an employer’s stock purchase plan, tax considerations, illiquidity concerns, or personal preference, we proactively adjust other holdings to mitigate the associated risks.