New ways of diversifying

The FT uses a Healthy eating analogy to discuss the new ways of trying to diversify risk. This involves the use of factor rather than diversification through assets and countries:

1. Volatility (traditional volatility)
2. Momentum (buying of winners)
3. Quality (strong balance sheet firms)
4. Value (cheap investments)
5. Yield (high income)
6. Growth (high earnings growth)
7. Size (Small companies do better)

There are also bond factors

1. Duration (sensitivity to  rate changes)
2. Curve (maturity and return)
3. Volatility (sensitivity to foreign exchange movements)
4. Spread (credit risk)

These  move beyond value and growth or carry and momentum. Though all asset classes may fall in crisis, the value drivers tend to find more diverse performance.