Diversification vs. "lottery ticket"
DFA showed that diversification outperforms most of the time.
What I’m reading…
Bloomberg: ‘Black Holes for Capital Gains’: New Tax Trick Takes Off in ETFs
Alpha Architect: AAUS launches with $445 million via a 351 Exchange
DFA: Addressing Concentrated Stock Positions in Client Portfolios
BlackRock: Loss harvesting strategies tax efficiently diversify concentrated stock
AQR: A Brief Guide to Pricing and Taxation of Variable Prepaid Forwards
Wealth & Law (Podcast): Creative Uses of CRTs in 2025
Wealth & Law (Podcast): The Very Many Charitable Remainder Trusts
Risk of Ruin (Podcast): A Healthy Disrespect (MTG, gambling, training MLB elite)
“Lottery ticket”
DFA says diversification wins in most scenarios and calls single-stock bets a "lottery ticket.”
Addressing Concentrated Stock Positions in Client Portfolios (June 2024) compares:
1) a low volatility single stock
2) a high volatility single stock
3) diversifying w/ an exchange fund (cost = 60 bps)
4) selling and investing the proceeds in an ETF (cost = 4 bps)
In their experiment, diversification wins in bad markets.
Concentration wins in good markets.
The upshot is that diversification wins *most* of the time.
Hard to look away from that high vol single stock lottery ticket, though.
Take that bet if you want, but do so with eyes wide open.
BlackRock’s peer-reviewed paper
Loss harvesting strategies tax efficiently diversify concentrated stock includes a little image classifying single-stock de-risking solutions by speed.
I embellished their image (below) in my full LinkedIn post.
and I hosted our first live event.
~150 people tuned in for the LinkedIn Live broadcast.
That was fun! More events are coming up!
Trapped by tax strategy
Not even my dad uses my vibe-coded app
Fed budget
No cameras
Never estimate me
