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Diversification helps in Long Run
Old 02-16-2015, 01:02 PM   #1
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Diversification helps in Long Run

Article is about how asset allocation diversification constitutes one of the key factors in long-term success of an investment plan. This piece contains nothing new to this educated gang but it reinforces, to me, the significance of staying diversified with my investments.

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Asset allocation constitutes one of the key factors in long-term investment success. When designing a portfolio that meets your risk tolerance, you as an investor need to realize that a portfolio of 50% stocks likely obtains approximately half the gain when the market advances, but suffers only half the loss when the market declines.
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Of course not. Year after year, we donít know which asset category will provide the best return; a diversified portfolio gives the best odds that we hold at least a piece of each yearís big winner. Large-caps that won big this year may easily lose big the next.
Donít be overly concerned if your diversified portfolio underperforms against a non-diversified benchmark over a short period. Long-term results must mean more to you than short-term swings.
Star News | Diversified? Look Long-Term
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Old 02-16-2015, 11:33 PM   #2
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I totally understand this..."When designing a portfolio that meets your risk tolerance, you as an investor need to realize that a portfolio of 50% stocks likely obtains approximately half the gain when the market advances, but suffers only half the loss when the market declines. "

FIREd April 2007. Set AA to 50/50. Crazy for age 48 with a pension in place and another coming in late 2014 ? Perhaps. When you're one deep (widowed, no spousal $ backup), a girl has to be careful. Very careful.

Along comes 4Q08. Overall portfolio unrealized loss approx 25%. A bit of a stomach lurch but at least it wasn't a 50% drop.

Along comes the rest of the story to 2015...that 25% loss went away very quickly. Whew !

Just an example in a short time span of 8 years. Still sticking to my 50/50 rule. What I may miss in market surges is compensated for by a good night's sleep.
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Old 02-17-2015, 10:11 AM   #3
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Yep, I think most of us agree with the concept of diversification.

I go further and have diversified my sources of income. I have three and hopefully I can live OK on just two if that ever happens.

Diversification - Don't Leave Work without It.
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