#investment-risk

#investment-risk

With geopolitical tensions so fraught, the Bank of England wanted to avoid a knee-jerk reaction and is trying to project calm by keeping rates on hold. But there's clearly unease spreading around the table, as oil prices reach scorching levels and the repercussions risk seeping into the price of everyday goods.

According to a new paper by researchers at the London Business School and Yale, prediction markets are largely dominated by the top 3.14 percent of users. On a platform like Polymarket, which has a monthly active user base of around 700,000 bettors, this means around just 21,000 highly informed gamblers are coming out ahead.

Over time, markets get ahead of themselves. Excitement over AI, green energy, or whatever the next big thing is tends to push stock valuations far beyond what fundamentals justify. Accordingly, more often than not, a correction can be the catalyst that brings valuation discipline back into the discussion. Think of it as the market taking a deep breath.

In 2022, the classic 60/40 balanced portfolio of stocks and bonds didn't provide much protection. In fact, it lost nearly as much as a 100% equity portfolio.

The Invesco DB Commodity Index Tracking Fund (NYSEARCA:DBC) is up 42% over the past year, and nearly 29% year-to-date. These gains reflect a war that has scrambled global commodity supply chains from crude oil to wheat to fertilizer.

While over-diversification is not a term you hear often, the financial industry has spent decades telling investors that more is better. More funds, more sectors, more geographic exposure, and more asset classes, galore. The thing is, when a retiree holds 15 or 20 ETFs across overlapping strategies, the result isn't going to be safety, more like dilution.