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> investing in the same sector that you are employed-in is actually a kind of anti-diversification You can reduce your microeconomic risks by making investment

> investing in the same sector that you are employed-in is actually a kind of anti-diversification You can reduce your microeconomic risks by making investments in and around your sector of occupation. Especially when betting against yourself. For example, someone who works in the electric vehicle space could reduce their risk by making personal investments in ICE companies, just in case EV adoption is slower than expected. A person who works in a payment processor could invest in visa/mastercard, to protect from the risk of fee rises. A privacy tech investor could put money into adtech, so they can make money whoever wins.

UncleMeat 2y ago
> For example, someone who works in the electric vehicle space could reduce their risk by making personal investments in ICE companies, just in case EV adoption is slower than expected. This works well if the EV industry slows and ICEs are poised to dominate the future. This works very very badly if the vehicle industry as a whole slows and the entire sector tanks.
- mattmaroon 2y ago
  It may work in the actual case: EVs are the future, but the longer term future, and the market irrationally decides a company that makes 1% of the cars is worth 50% of the industry because they greatly overestimate how fast the transition will occur and the legacy auto makers (whose stocks have underperformed due to the same bad prediction) have plenty of time to use their substantial advantages to compete.
- spacebanana7 2y ago
  Yeah it only works well for narrowly defined microeconomic risks. However, in sectors like vehicles there's a relatively low risk people will stop car purchases altogether but a very very high risk they'll buy from another manufacturer instead of yours.
orojackson 2y ago
> You can reduce your microeconomic risks by making investments in and around your sector of occupation. Especially when betting against yourself. Or I can just put my money in something like VTI (total US stock market) or VT (total world stock). Effectively does the same thing with almost zero effort. One thing I don't really like about the comments here is how insistent people are in doing something specific as opposed to picking the simplest thing and then sticking to it. Most of the power of investing comes from time. Admittedly, though, I have been putting new money into a leveraged ETF, RSSB, which is a 2x leveraged 50/50 global stocks and bonds fund (so 100/100). Existing money is still in VT. The only reason why I'm pursuing this is because of Cliff Asness's great article [1], which argues against going 100% stocks (which I used to do) and instead prefers using something like leverage on a 60/40 portfolio. [1] https://www.aqr.com/Insights/Perspectives/Why-Not-100-Equities https://www.aqr.com/Insights/Perspectives/Why-Not-100-Equiti...

UncleMeat 2y ago

> For example, someone who works in the electric vehicle space could reduce their risk by making personal investments in ICE companies, just in case EV adoption is slower than expected. This works well if the EV industry slows and ICEs are poised to dominate the future. This works very very badly if the vehicle industry as a whole slows and the entire sector tanks.

mattmaroon 2y ago
It may work in the actual case: EVs are the future, but the longer term future, and the market irrationally decides a company that makes 1% of the cars is worth 50% of the industry because they greatly overestimate how fast the transition will occur and the legacy auto makers (whose stocks have underperformed due to the same bad prediction) have plenty of time to use their substantial advantages to compete.
spacebanana7 2y ago
Yeah it only works well for narrowly defined microeconomic risks. However, in sectors like vehicles there's a relatively low risk people will stop car purchases altogether but a very very high risk they'll buy from another manufacturer instead of yours.

orojackson 2y ago

> You can reduce your microeconomic risks by making investments in and around your sector of occupation. Especially when betting against yourself. Or I can just put my money in something like VTI (total US stock market) or VT (total world stock). Effectively does the same thing with almost zero effort. One thing I don't really like about the comments here is how insistent people are in doing something specific as opposed to picking the simplest thing and then sticking to it. Most of the power of investing comes from time. Admittedly, though, I have been putting new money into a leveraged ETF, RSSB, which is a 2x leveraged 50/50 global stocks and bonds fund (so 100/100). Existing money is still in VT. The only reason why I'm pursuing this is because of Cliff Asness's great article [1], which argues against going 100% stocks (which I used to do) and instead prefers using something like leverage on a 60/40 portfolio. [1] https://www.aqr.com/Insights/Perspectives/Why-Not-100-Equities https://www.aqr.com/Insights/Perspectives/Why-Not-100-Equiti...