Reflections – Asset Allocation

Most experienced investors may look at my portfolio and frown at the disproportionate distribution of assets towards Alibaba. Having 40% of my portfolio be in a single business is highly susceptible to risk and also locks up much of my cash from dipping into other businesses. I definitely had much confidence in the growth potential of Alibaba (and I still do) but I’ll admit that this rookie mistake was made long ago when I hadn’t totally grasped the concept of opportunity cost. For now I am still willing to hold a portion of Alibaba in my portfolio but as I continue to learn about other businesses, I would like to reduce my holdings on the company eventually.

[I do realize that there’s an argument for not diversifying your portfolio too much in favor of putting your eggs in a secure and fast-growing company. However, as a novice in investing, and also given my strong aversion for risk, I am inclined to work towards diversifying my portfolio for now. Given also the highly uncertain nature of the economy and the fast-paced nature of technology in general, this might be a prudent decision after all]

On another related note, recently I’ve been delving into dividend stocks. I am thinking of adding a 10-20% holding of various dividend stocks into my portfolio but I’ve yet to do enough research in this area. This shall be work in progress for now.


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