CNBC's Jim Cramer reiterated his belief on Monday that diversification was the key to a profitable portfolio. He used two prominent investors' strategies as an example.
Cramer stated that "we don't want your nest egg concentrated in a few stocks which may be wrong at the moment and cause you to give up the entire asset category."
On Monday, he emphasized his belief that diversification was the key to a profitable portfolio.
Cramer examined the strategies of
Cathie Wood is a woman of the world.
Larry Fink explains why diversification, in his opinion, is the best long-term strategy.
Cramer stated, "We don't want your nest egg concentrated in a few stocks which may be wrong at the moment and cause you to give up this wonderful asset class." "And that's my fear. It is my greatest fear. Blackrock's diverse style is an antidote for that fear."
Cramer stated that Wood's investment strategy is to focus on a handful of stocks with the greatest potential. Cramer said that Wood has used this strategy in the past to profit from great runs, like her early call on
But has suffered losses over the last few years. Her holdings include a group of Nasdaq-listed stocks.
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The stock market has not done well. Cramer stated that ARK used to be worth $28 billion, but only has $9 billion now.
Cramer explained that a portfolio without diversification is dangerous because you have to be correct every time or your investors will lose everything. "In reality nobody is that good at maintaining this method for the long-term, and they shouldn’t boast about it."
Cramer added that Fink prioritizes diversification. BlackRock, he said, is the largest asset manager in the world, with $9.4 billion. Cramer said Fink’s core strategy was to make portfolio choices based on an holistic approach to market. This includes investing in different sectors, and taking into consideration the many nuanced variables that influence inflation. These include supply chain, geopolitics, and the transition to a low carbon economy.
Cramer said that Wood and Fink won't always make the best decisions, but investors can increase their odds of success over time by following a diversified approach.
Fink knows how to handle this risky situation. Cramer stated that Fink's clients were "focused on outcomes" and that this manifested in a blend of active index, cash and private markets. "That's what we call a strategy that keeps you in the right assets over time. Not a tactic for either hitting it out of the ballpark or striking out."
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