As a result, changes in the market
value of a single investment could cause greater fluctuations in share price than would occur in a more diversified fund.
Having a well - diversified bond ladder does not guarantee that you will avoid a loss, but it can help protect you the way that any diversified portfolio does, by helping to manage the
risk of any single investment.
This level of diversification not only means that investors are exposed to a broader range of potential return - boosting opportunities but are also protected from the risk that the
failure of a single investment could cause material damage to the overall portfolio.
Although this investment in Serco has performed poorly, the UKVI portfolio has outperformed the FTSE All - Share over the past year (and three years, and from inception), which to me is evidence that it isn't a good idea to focus on the
results of a single investment.
Perhaps the best advice is only to hold the position if you are capable of evaluating the business operationally, are convinced that the fundamentals are still attractive, believe the company has a significant competitive advantage, and you are comfortable with the increased dependence upon the
performance of a single investment.
As a result, changes in the market
value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
So, with a mutual fund, your money is no longer dependent on the performance
of a single investment, but instead is an average of the entire collection of investments.