Right now in the markets we can observe a textbook rotation of capital:
Intel $INTC and other semiconductor companies like $AMD, $AVGO or $ASML are falling, but value and dividend companies are rising. Let a representative of this sector be $KO, which is at an ATH today.
Portfolio diversification is not to be dismissed :)
So do I understand it correctly that it's better to hold something like KO, instead of absolutely fundamental semiconductor companies, just because of lower volatility and with a performance of 1y -18%, 3y -40%, 5y -55% (10y -150% vs 300% SPY), and thus miss out on hundreds of percent? ;) What is cola-cola likely to do for the next 5-10 years, while a completely new sector is emerging here around LLMs?
We've been tracking capital movements for a while now. AMAT, APH, KLAC, LRCX are also going down... MSFT and GOOGL are holding up. Insurers HIG, L, WRB, CINF and RSG are going up... Without diversification, you're like someone without a preventive check-up.
That's right. This entire year could to some extent be characterized as a rotation of capital. When the riskier companies (technology) are rising, everyone looks like a genius, but then it only takes a few days or even hours (with today's volatility) and a portfolio without solid diversification can lose even tens of percent.
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