The value of diversification

ASOS Profit Warning

We woke up to a profit warning from ASOS and knew that it wouldn’t take long for the share price to react. It is currently down circa 40%.

We wanted to take this opportunity to remind you of the importance of diversification and the impact this can have on risk mitigation.

Our Stellar ESP AiM Portfolio Service is one of the most diversified on the market and holds 40 AiM quoted companies to reduce concentration risk and lower volatility.

This means that whilst our investors do hold ASOS, it constitutes only 2.1% of their portfolio. All other share prices being equal, the fall in ASOS will equate to a 0.8% fall in the total portfolio value.

This highlights how increased portfolio diversification mitigates individual stock volatility.

Patisserie Valerie

Another example from earlier this year, which affected many of our competitors, was Patisserie Valerie.

Patisserie Valerie has been suspended since 11 October, causing problems for any investors holding the shares.

We sold out of Patisserie Valerie on 8 May and consequently our investors were not holding the stock at the time of suspension.

This illustrates how active, experienced management can make a difference to portfolio performance.

To learn more about our ESP AiM Portfolio Service and how our investment managers reduce risk and volatility click here or get in contact with one of our team on 020 3907 6984.