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In very broad terms, alot of "diversification" talk from the investment community is just salestalk, it's way overused IMO. It's a way for investment "pros" to cover their backside in case your portfolio goes down.
-If it goes up, great. Diversified or not.
-If it goes down, the standard mantra is "get diversified"!
Warren Buffett for example, he doesn't believe in diversifying just for diversity sake.
If I went to a mall looking to invest in a store, I wouldn't necessarily diversify into 10 or 15 stores, just because that's the thing to do. They all might be lousy investments. Or one store could completely out perform the next 10.
That's just one view...maybe others will chime in.
Oil, gold and commodities tend to go counter to stocks...if the 5 areas are equally weighted, it seems like they'd cancel each other out.
How has this group performed over the past 10-20 years?
i was looking at some very old posts on diversification .
boy the comments could not have been more wrong since 2007 .
oil , gold and commodities run counter to stocks ? maybe gold does at times of steep drops but commodities , stocks and oil are tied to a booming economy the way stocks are .
2008 saw stocks , oil and commodities plunge while gold went up
the only time all would move together is very high high inflation . more moderate inflation would not have gold do much as long as there were better functioning choices.
so trying to create a see saw lever relationship between assets and not economic conditions is futile
An advocate of diversification of the type you are asking about is Dr. Craig Israelsen.
He designed an approach called 7Twelve - seven different asset classes, twelve different funds, balanced essentially evenly. There's no reason I can see for the even split other than 'simplicity'-but if you're already dealing with 12 assets you gave up some measure of simplicity at the gate.
There's a whole book on it called, unsurprisingly, 7Twelve, which has about 4 good chapter's worth of material, but there's a lot of fluff text in there to make it a book. Returns are also modeled at www.portfoliocharts.com as one of the standard portfolios.
You can do better, for sure. You can also do a lot worse. Go to portfoliocharts and compare it to other portfolios to see how it has done over time. If you're looking to basically own the market, and by the market I mean everything under the sun (not just stocks), this is one way to do it.
I’m certainly not an expert in retirement plans. Maybe I just don’t understand the graphic or what it’s trying to convey.
But for example,
How does the permanent portfolio rank 1 in ulcer (low risk) and have corresponding low returns 16 (makes sense) but still finish first in deepest and longest duration and withdraw rate? What’s the difference between deepest duration and withdrawal rate? Maybe I just don’t know what deep duration rate is if it’s not a larger amount of drawdown?
Frommy limited understanding of that list, it seems like the “pinwheel” one is the best bang for your buck. You get top end return with middle tier risk/ulcer. You’d typically have 3 standard deviations to be within a 95% confidence interval. Anything beyond 3 deviations would be an outlier either positively or negatively. I don’t see how it can score so highly in everything but then also has what I’m interpreting as a high variance of failure by making you the outlier. To me, it’s saying “It usually achieves those good outcomes but when it doesn’t…it reallly doesn’t”.
And maybe it’s because classic 60/40 is just the base case “lazy” answer, but it generally seems terrible. Granted, it’s isolated into a list of plans that I assume were designed specifically around beating it and doing better.
Last edited by Thatsright19; 12-09-2021 at 05:04 AM..
Oh maybe the safe withdrawal is the yearly drawdown whereas the deep drawdown is the lowest balance of the overall portfolio, which would seem like it would make sense that the worse rated deep drawdowns have the worse standard deviation ratings (which I assume is outright failure).
Last edited by Thatsright19; 12-09-2021 at 08:16 AM..
Oh maybe the safe withdrawal is the yearly drawdown whereas the deep drawdown is the lowest balance of the overall portfolio, which would seem like it would make sense that the worse rated deep drawdowns have the worse standard deviation ratings (which I assume is outright failure).
My retirement money is split between a 401k (~45%) and an IRA (~55%). The 401k is in stock funds and the IRA is mostly in individual stocks. Within the IRA about 40% of the value is tied up in one stock: AAPL, due mostly to price appreciation and dividend reinvesting over the years.
Anyone see a problem with a fairly large chunk being in Apple? I've thought about moving some money to a different stock to guard against a Black Swan event but what other stock would offer safety and growth like AAPL offers? Maybe Costco?
i am not a fan of putting to much into any individual stock …for my fun trades they are fine .
my serious dough is only broad based funds
I agree but TBH I didn't "put" 40% of my money into AAPL. It just grew and grew, so I don't want to knee-jerk the money out and put it somewhere else "because they say you should".
Here is a very useful tool to track how your investments perform. You can track as many as 10 items over a variety of time frames. It's a lot of fun to move the slider around to see much money you would have made if you bought at the right time. You can go back to as far as 8.5 years to check prices. You need to move the cursor over the lines to find prices. Take a few minutes to read the instructions and you will have one of the most important and useful investment tools available. Master the charts and you won't need a second opinion.
Your first link doesn't work for me... "Page Not Found".
The second link appears to be a link to Tiffany shopping. What has that got to do with the topic of discussion?
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