The hottest Portfolio Construction Substack posts right now

And their main takeaways
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Top Finance Topics

FOMO and the optimal portfolio size

Klement on Investing • 2 implied HN points • 12 Jan 26
💰 Finance Portfolio Construction
  1. Random global portfolios need hundreds of stocks (often 250–750) to meaningfully diversify stock-specific risk and narrow return outcomes, because a few big winners drive returns while many stocks fail.
  2. ESG-weighted portfolios converge even more slowly, so applying ESG selection typically increases the number of holdings required to stabilize volatility and returns.
  3. Concentrated portfolios still make sense for genuinely skilled active managers because concentration amplifies and reveals skill quickly; if managers are effectively random, broad indexing or very large portfolios are the better choice.

Improving factor returns through structural factors

Klement on Investing • 2 implied HN points • 04 Dec 25
💰 Finance Portfolio Construction
  1. Reported factor returns are partly driven by changing valuation multiples, not just fundamentals; removing those valuation effects reveals a structural premium that better reflects underlying, fundamental-driven returns.
  2. Valuation-driven revaluation effects shrink over longer horizons, so structural factor returns become more important for long-term investors and should guide long-term factor weightings.
  3. Constructing multi-factor portfolios using structural premiums improves expected long-term performance versus conventional approaches, though investors will still experience realized valuation swings that cannot be hedged.

Managing private equity portfolios

Klement on Investing • 2 implied HN points • 13 Feb 24
💰 Finance Portfolio Construction
  1. Private equity managers have unique challenges in balancing portfolio concentration for high returns and diversification to manage risk.
  2. Private equity portfolio characteristics differ from those of listed equity funds, with smaller, riskier holdings often generating the most alpha.
  3. Performance in private equity is less about individual deals and more about portfolio construction, where fund manager skill plays a significant role.

How to construct an investment portfolio in different inflation regimes

Global Markets Investor • 0 implied HN points • 01 Mar 24
💰 Finance Portfolio Construction
  1. Stocks perform best in falling and stable inflation; commodities and precious metals perform well in rising inflation.
  2. During periods of falling inflation, stocks are favored, followed by bonds and real estate. Commodities tend to be the worst performers.
  3. In stable inflation environments, stocks still play a significant role, while real estate, bonds, commodities, and precious metals are also included in the portfolio.
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