Lately, I’ve been reading a lot about Marvel Studios, thanks to Avengers Infinity War and it randomly struck me that the history of Marvel Studios, the way they operate and function, can help to comprehend a lot of investing principles impeccably. So, this blog post is basically about understanding one of the most basic investing principles in correlation with Marvel Studios.
So, let’s get started.
When you start reading about investing, or when you actually start investing, a lot of people will advise and instruct you to diversify your portfolio. Diversification is really important when it comes to minimization of risks and maximization of profits. As a thumb rule, most people say that you should never invest more than 10% of your net worth in any one stock.
Marvel follows this very principle.
“Marvel has the advantage of not being one thing but being a little bit of everything.” Says Joss Wheldon the director of Avengers.
He further states that ” The Harry Potter Movie was one thing, James Bond one thing but this can disparate franchise and make them part of the same spreadsheet.”
And, I completely agree with Joss Wheldon, don’t you?
Marvel has a plethora of characters and each brings a unique energy to their portfolio, which you might know by the name of Marvel Cinematic Universe. So, if one character fails to comply with the set financial return, the financial inadequacy can be compensated from other characters.
The same goes for investment portfolios as well. If one stock/bond/mutual fund etc. fails to provide sufficient return or even bear losses, your risk is always minimized because of diversification of the portfolio.
A word of caution here: Do not hold too many stocks in your portfolio.
With excessive diversification, it becomes difficult to manage and monitor them. Money control recommends that a passive long-term investor should hold not more than 15-20 different stocks.
The potential danger of holding too many stocks can be understood from the implied danger that the entire Marvel Cinematic Universe face.
According to BBC, ” The narrative snowball of Marvel, the way that everything accumulates- means it gets bigger and more popular but also more unwieldy.”
“That happened in the comic books. With all the crossovers, everything became completely uninviting to the new fan. Eventually, Marvel had to hit the reset button and start all over again, because you can’t hold all of it in your head.”
Thus, one of the keys to maximizing the returns from your portfolio is to diversify it. Diversification by holding stocks of different industries is advisable over holding stocks of different companies belonging to the same industry.
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