@article {Stutzer32, author = {Michael Stutzer}, title = {The Paradox of Diversification}, volume = {19}, number = {1}, pages = {32--35}, year = {2010}, doi = {10.3905/JOI.2010.19.1.032}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The current market malaise may keep some investors on the sidelines. The benefits of diversification may not seem as appealing in situations where the constituent investments are likely to lose money. Yet, using relatively simple math, the author shows that diversification maintained by rebalancing can easily turn individual assets{\textquoteright} negative cumulative returns into positive portfolio cumulative returns. This seemingly paradoxical result is the investing analog of a well-known phenomenon studied by physicists and mathematicians called Parrondo{\textquoteright}s Paradox.TOPICS: Portfolio management/multi-asset allocation, exchanges/markets/clearinghouses, statistical methods}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/19/1/32}, eprint = {https://joi.pm-research.com/content/19/1/32.full.pdf}, journal = {The Journal of Investing} }