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What Australian investors: Need to know to diversify their portfolios

Issue 4 (2013)

Abstract: An ASIC survey in 2008 showed that Australian investors do not diversify their portfolios sufficiently, with the average investor holding only 2.19 securities. To study this issue, we simulate portfolios using daily observations for all traded and delisted equities in Australia between 1975 and 2011. We calculate two measures of risk, including heavy tailed distributions to account for extreme events. For each risk measure, we recommend the number of portfolio holdings that result in a 90 per cent reduction in diversifiable risk for an average and a more conservative investor. We find that, on average, 24 to 30 stocks are sufficient to attain a well-diversified portfolio.

To cite this article: Alexeev, Vitali and Tapon, Francis. What Australian investors: Need to know to diversify their portfolios [online]. JASSA, No. 4, 2013: 14-20. Availability: <;dn=865578602377637;res=IELBUS> ISSN: 0313-5934. [cited 28 Jun 17].

Personal Author: Alexeev, Vitali; Tapon, Francis; Source: JASSA, No. 4, 2013: 14-20 DOI: Document Type: Journal Article ISSN: 0313-5934 Subject: Australian Securities and Investments Commission; Portfolio management; Individual investors; Investments--Economic aspects; Peer Reviewed: Yes Affiliation: (1) Lecturer, School of Economics and Finance, University of Tasmania
(2) Professor, Department of Economics and Finance, University of Guelph, and Partner, Investment Portfolio Design Ltd (InPoDe), Guelph, Ontario, Canada

Database: Business Collection