{"id":6037,"date":"2020-10-23T15:54:00","date_gmt":"2020-10-23T12:54:00","guid":{"rendered":"https:\/\/sifterfund.com\/nain-sifter-hajauttaa-osakesijoituksensa-rahaston-kautta-saa-hyvan-hajautuksen\/"},"modified":"2021-01-29T14:40:37","modified_gmt":"2021-01-29T12:40:37","slug":"sifter-fund-helps-you-diversify-your-equity-investments","status":"publish","type":"post","link":"https:\/\/sifterfund.com\/en\/sifter-fund-helps-you-diversify-your-equity-investments\/","title":{"rendered":"Sifter Fund helps you diversify your equity investments"},"content":{"rendered":"\n<p class=\"lead-p\"><a href=\"https:\/\/sifterfund.com\/en\/long-term-investing-how-to-choose-stocks\/\">Long-term investment<\/a> and diversification are two of the golden rules of equity investment. Historically, applying these principles has led to good performance.<\/p>\n\n\n\n<p>A diversified portfolio is more resilient to any crises that affect a certain industry or country. During the COVID-19 spring, for example, the role of industry diversification was underscored as companies in the travel and restaurant sectors were hit especially hard.<\/p>\n\n\n\n<p>In this article, we discuss the diversification of the Sifter Fund and how it is accomplished in practice.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">A fund helps diversify equity investments<\/h2>\n\n\n\n<p>One of the key features and advantages of fund investments is the diversification of risk. The 30 companies in the Sifter Fund currently represent 18 industries and 7 countries. The rules of the fund do not specify the extent to which we can invest in companies in a given industry or country.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Instead, we look for companies that are among the most successful players in their respective industries.<\/p><\/blockquote>\n\n\n\n<p>We believe that high-quality companies with strong profit performance can be found in nearly all industries.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The diversification policy of the Sifter Fund<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">What we believe in<\/h3>\n\n\n\n<p>The Sifter Fund has an exceptional investment strategy as we do not believe in pre-defined diversification rules.&nbsp; In practice, this means the following:<\/p>\n\n\n\n<ol class=\"wp-block-list\" type=\"1\"><li>We do not set targets for what proportion of the fund\u2019s shareholdings should be in certain continents or industries.<\/li><li>What we are interested in are companies and their business. Having a unique business model and a strong capacity to make money is more important to us than a given industry or country. In other words, we apply a bottom-up approach rather than a top-down approach.<\/li><li>Our investment approach is driven by our <a rel=\"noreferrer noopener\" href=\"https:\/\/sifterfund.com\/en\/selection-process\/\" target=\"_blank\">elimination process,<\/a> which leads us to the most attractive companies around the world. When valuations are low in a given industry or country and our quality indicators are satisfied, we focus our research activities on those companies.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">We eliminate certain industries<\/h3>\n\n\n\n<ol class=\"wp-block-list\" type=\"1\"><li><strong><strong>Banking and insurance<\/strong><\/strong> \u2013 we find that the balance sheets of banking and insurance companies are too hard to understand and may include unpleasant surprises.<\/li><li><strong><strong>Highly cyclical industries<\/strong><\/strong> \u2013 for example, construction, shipbuilding and other industries in which individual projects are excessively significant and there are dramatic fluctuations in profit performance.<\/li><li><strong><strong>Industries that are directly linked to raw materials<\/strong><\/strong> \u2013 we exclude oil and gas companies, for example. We do not have an adequate understanding of the development of the prices of these raw materials and their impacts on the companies\u2019 profit performance.<\/li><li><strong><strong>Bulk industries<\/strong><\/strong> \u2013 for example, companies whose products do not have a clear competitive advantage and who mainly compete on price. We do not believe we will find high-quality and growing companies in these industries.<\/li><li><strong><strong>Industries that are incompatible with our rules concerning responsibility<\/strong><\/strong> (<a href=\"https:\/\/en.wikipedia.org\/wiki\/Environmental,_social_and_corporate_governance\" target=\"_blank\" rel=\"noreferrer noopener\">ESG<\/a>), such as tobacco, alcohol, firearms and adult entertainment companies as well as industries in which the reputation and negative environmental impacts of companies are not in line with our criteria.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">We also eliminate certain countries and stock exchanges<\/h3>\n\n\n\n<p>We exclude countries that have weak investor protection and eliminate countries \u2013 such as countries in Africa and the Middle East \u2013 where access to high-quality company information is unreliable or the companies\u2019 sustainability indicators fail to satisfy our criteria.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>The aim of these elimination principles is to reduce risk.<\/p><\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\">Industry diversification 2020<\/h2>\n\n\n\n<p><strong><strong>The Sifter Fund\u2019s largest industry<\/strong><\/strong> consists of semiconductor manufacturers, such as Taiwan Semiconductor, Lam Research and equipment manufacturers in this field.<\/p>\n\n\n\n<p>Semiconductors, such as chips and integrated circuits, are the basic components used in all types of electronics. Growth in the number of smart devices and the decreasing size of electronics and chips lead to increased demand for these components.<\/p>\n\n\n\n<div class=\"wp-block-image graafi\"><figure class=\"aligncenter size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-sector-allocation-1024x683.png\" alt=\"Sifter Fund Sector allocation 30.9.2020\" class=\"wp-image-5964\" srcset=\"https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-sector-allocation-1024x683.png 1024w, https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-sector-allocation-500x333.png 500w, https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-sector-allocation-768x512.png 768w, https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-sector-allocation.png 1464w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>The Sifter Fund\u2019s sectors presented as industries. The Sifter Fund currently has investments in 18 industries (September 30, 2020)<\/figcaption><\/figure><\/div>\n\n\n\n<p><strong><strong>The Sifter Fund\u2019s second-largest industry<\/strong><\/strong> is stock exchanges and financial data. Examples of the fund\u2019s shareholdings in this category include Deutsche Boerse and S&amp;P Global Inc. While these companies can be broadly included in the financial sector, the nature of their services differs from banks. Their balance sheets are not difficult to interpret, which sets them apart from banks, and their services are largely based on continuous subscriptions, which we believe makes them strong and less cyclical.<\/p>\n\n\n\n<p><strong><strong>The Sifter Fund includes several smaller industries<\/strong><\/strong> in its portfolio. Their weight in the portfolio is only 2\u20133% each. In many cases, they are individual companies that are the best and most successful in their respective industries. For example, the trucking industry (2.3%) is represented in Sifter\u2019s portfolio by the US-based <a href=\"https:\/\/sifterfund.com\/en\/sifter-invested-in-three-quality-companies-including-a-robot-vacuum-manufacturer\/\" target=\"_blank\" rel=\"noreferrer noopener\">Old Dominion Freight Line.<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Geographical diversification 2020<\/h2>\n\n\n\n<p>We have not set targets for what proportion of the fund\u2019s shareholdings should be in certain continents or countries.<\/p>\n\n\n\n<div class=\"wp-block-image graafi\"><figure class=\"aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-geographical-allocation-1024x683.png\" alt=\"Sifter Fund Geographical allocation\" class=\"wp-image-5929\" srcset=\"https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-geographical-allocation-1024x683.png 1024w, https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-geographical-allocation-500x333.png 500w, https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-geographical-allocation-768x512.png 768w, https:\/\/sifterfund.com\/wp-content\/uploads\/sifter-fund-geographical-allocation.png 1464w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>The Sifter Fund\u2019s geographical distribution (September 30, 2020)<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">How Sifter\u2019s geographical diversification has changed<\/h3>\n\n\n\n<div class=\"wp-block-group box\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h4 class=\"wp-block-heading\">North America<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>In 2020, North America (US and Canada) represents more than 65% of the Sifter Fund\u2019s shareholdings.<\/li><li>It is interesting to note that, in 2010, North America represented only about 10% of our portfolio.<\/li><li>The growth of North America\u2019s proportion of the portfolio\u2019s assets is the result of Sifter\u2019s elimination process rather than an active pre-defined diversification decision.<\/li><\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group box\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h4 class=\"wp-block-heading\">Asia<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>In 2020, Asia (Japan and Taiwan) represented 19% of the Sifter Fund\u2019s shareholdings.<\/li><li>A decade earlier, in 2010, Asian stocks accounted for nearly 50% of the portfolio.<\/li><\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group box\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h4 class=\"wp-block-heading\">Europe<\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>In 2020, Europe represents about 15% of the Sifter Fund\u2019s shareholdings.<\/li><li>This figure has fluctuated between 13% and 44% during the past decade.<\/li><\/ul>\n<\/div><\/div>\n\n\n\n<h2 class=\"wp-block-heading\">The portfolio\u2019s low turnover means lower costs for investors<\/h2>\n\n\n\n<p>Sifter\u2019s investment strategy is based on the key principle of buying high-quality companies for long-term ownership. This approach could be described as <em>buy and watch<\/em>.&nbsp;What does this mean for us?<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>We do not believe that we can create added value for our investors by buying and exchanging shares frequently.<\/p><\/blockquote>\n\n\n\n<p>Our investment decisions are based on lengthy and in-depth analyses of companies. It would be unfortunate to have to quickly sell the fund\u2019s holdings in a company that we have carefully researched. That would suggest that our analysis of the company would probably have been inaccurate to begin with.<\/p>\n\n\n\n<p>Each year, we study more than 100 new investment opportunities but end up investing in only about 3\u20135 new companies.<\/p>\n\n\n\n<p>During the past five years, the average turnover of Sifter\u2019s portfolio has been only about 10%.&nbsp;In other words, we have sold the Sifter Fund\u2019s shareholdings in three companies per year on average. As a rule of thumb, a portfolio turnover under 30% is considered low.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Long-term investment and the diversification of shareholdings are two of the golden rules of equity investment. Historically, applying these principles has led to good performance.<\/p>\n","protected":false},"author":6,"featured_media":6061,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-6037","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Sifter Fund helps you diversify your equity investments - Sifter Fund<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/sifterfund.com\/en\/sifter-fund-helps-you-diversify-your-equity-investments\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sifter Fund helps you diversify your equity investments - Sifter Fund\" \/>\n<meta property=\"og:description\" content=\"Long-term investment and the diversification of shareholdings are two of the golden rules of equity investment. Historically, applying these principles has led to good performance.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/sifterfund.com\/en\/sifter-fund-helps-you-diversify-your-equity-investments\/\" \/>\n<meta property=\"og:site_name\" content=\"Sifter Fund\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/sifterfund\/\" \/>\n<meta property=\"article:published_time\" content=\"2020-10-23T12:54:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-01-29T12:40:37+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/sifterfund.com\/wp-content\/uploads\/santeri-korpinen-sifter-fund-04.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"840\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Santeri Korpinen\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Santeri Korpinen\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/sifter-fund-helps-you-diversify-your-equity-investments\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/sifter-fund-helps-you-diversify-your-equity-investments\\\/\"},\"author\":{\"name\":\"Santeri Korpinen\",\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/#\\\/schema\\\/person\\\/cdaf3d3c950e7e984d33e9ddc788c214\"},\"headline\":\"Sifter Fund helps you diversify your equity investments\",\"datePublished\":\"2020-10-23T12:54:00+00:00\",\"dateModified\":\"2021-01-29T12:40:37+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/sifter-fund-helps-you-diversify-your-equity-investments\\\/\"},\"wordCount\":1078,\"publisher\":{\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/#organization\"},\"image\":{\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/sifter-fund-helps-you-diversify-your-equity-investments\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/sifterfund.com\\\/wp-content\\\/uploads\\\/santeri-korpinen-sifter-fund-04.jpg\",\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/sifter-fund-helps-you-diversify-your-equity-investments\\\/\",\"url\":\"https:\\\/\\\/sifterfund.com\\\/en\\\/sifter-fund-helps-you-diversify-your-equity-investments\\\/\",\"name\":\"Sifter Fund helps you diversify your equity investments - 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