I lost lots of money by trying to be too diverse in my investments! (bond, mutual funds)

[Money is everything]

I found this great website called Portfolio Visualizer and it really taught me some things about the stock market and investments! I learned that trying all kinds of exotic investments has cost me lots of investment return. I thought I would create a truly diverse set of investments that would be interesting to follow and protect me against a bear market. I should have just gone with VTI (Total Stock Market) and called it a day!

Here were the crazy investments, with the stock symbol in brackets, I have abandoned in recent months:

Mortgage REITS (Like: NLY)

Business Development Corporations (like: PSEC)

High Yield REITS (Like: GOOD)

Energy Trusts with high dividends (Like: BPT)

Preferred Stock: (Like: PFF)

Closed End Funds with high dividends (Like: YYY)

A single High Yield Stock (Like: T)

Penny Stocks: (Like: ROYL)

[concept_fusion]

Hmm. Well you live & you learn. You don't want to diversify into junk, you want to diversify into quality. NLY, ROYL, PSEC is all junk pretty much. PFF isn't bad in my opinion. T is debatable.

[bmw335xi]

Exactly, junk is junk... if you diversified into quality stocks or funds, you would still be doing well.

[mathjak107]

Diversifying for a bear market does not man betting only on prosperity and low inflation. What most call diversified is far from it. If on those big rallies in stocks nothing fell modestly you ain’t diversified

[mysticaltyger]

Oh well, at least you are admitting your mistakes.

I always get flak from someone about this, but I'd say there's nothing wrong with VTI, but I wouldn't be 100% stocks. Adding a bond fund or a bond ETF into the mix is a good idea, IMO.

[Cranston]

Originally Posted by mysticaltyger

I always get flak from someone about this, but I'd say there's nothing wrong with VTI.

Warren Buffett basically agrees with you on that

Anybody who gives you flak is arguing with Buffett.... draw your own conclusions

[PriscillaVanilla]

Penny stocks are often very risky, I'd never invest in them. People who invested in mutual funds are doing well right now.

[mysticaltyger]

Originally Posted by Cranston

Warren Buffett basically agrees with you on that

Anybody who gives you flak is arguing with Buffett.... draw your own conclusions

Well, actually the flak comes from owning bonds. Sorry if I didn't clearly express that.

[CaptainNJ]

Originally Posted by mysticaltyger

Well, actually the flak comes from owning bonds. Sorry if I didn't clearly express that.

LOL you own bonds? what a looooser.

just kidding. i actually dont hold bonds but i thought that made me more unique than someone who does. i figure if i really wanted to reduce the volatility then probably better to hold more cash than to hold bonds.

[SportyandMisty]

Originally Posted by concept_fusion

Hmm. Well you live & you learn. You don't want to diversify into junk, you want to diversify into quality.

Respectfully, I disagree.

You want to diversify into uncorrelated assets (preferably uncorrelated asset classes). You want one holding that tends to zig when the others zag (although that would be negative correlation rather than non-correlation).

An old professor of mine used to say, "the ideal 2-stock portfolio is to own stock in one company that makes baby diapers and another that makes condoms."

As an aside, the problem that happened in the Great Recession was most all historically uncorrelated asset classes became correlated and went south, so that diversification didn't help.