Energy Being Tested:
There is an old saying in the markets, that concentration builds wealth, and diversification preserves it. And a quote from Charlie Munger backs the statement up saying, “the goal of investing is to find situations where it is safe not to diversify.” I guess both of those adages depend on your time frame, but if one was to diversify to much, it would make sense to just put your money into an index fund. Then comes into question if you want average returns you trade the averages (indexes). Comparing the “equal weighted” sector ETFs, whether it be the XRT to the XLY in consumer, or the ratio chart of the XOP to the XLY within energy, shows that diversification is the way to go, if you are a bit lazier with your stock selection. If one is willing to do their homework, and utilize proper risk management, holding fewer names, but leaders it can help a portfolio capitalize. The top heavy XLY with AMZN and TSLA, or the XLE with CVX and XOM, rely on a bit of luck. They can trounce when they are in firm uptrends, but lag when they do not. The diversified camp is winning at the moment.