"The Myth of Diversification or How to Really Diversify"

[Clive]

?

[gizmo_rat]

Where were all the educational pieces on non correlation 4 years ago? Perhaps I was just looking in the wrong places, or didn't care enough when the going was good.

[moda0306]

We didn't have 2008 4 years ago.  My friends still look at me like I just slapped their mother when I say I like LTT's over the next 10 years.

[Gumby]

Clive, Thanks for posting this. Very interesting, indeed. JDJ's blog, The Draconian seems to be fairly informative and even entertaining.

[LifestyleFreedom]

Peter Bernstein had the notion that you’re not really diversified unless you own something you’re uncomfortable with (http://www.vanguardblog.com/2009.06.26/ ... stein.html).

Pick the asset classes of the Permanent Portfolio that you're uncomfortable with and now you know why you need to own them -- to be diversified per the Harry Browne school of investing.

[6 Iron]

Clive, thanks for the link. I am also glad to see you posting again, although sometimes, I get the feeling that you are playing chess, while I am playing checkers (or maybe Candyland).

[AdamA]

Peter Bernstein had the notion that you’re not really diversified unless you own something you’re uncomfortable with (http://www.vanguardblog.com/2009.06.26/ ... stein.html).

Pick the asset classes of the Permanent Portfolio that you're uncomfortable with and now you know why you need to own them -- to be diversified per the Harry Browne school of investing.

Great point.  This is something that people need to understand about the PP, especially when starting out.  It answers the questions beginners often have about LTTs and the devaluation of the dollar, or gold being in a supposed bubble.  It's actually good to feel a little nervous about one of the asset classes. 

[Lone Wolf]

Peter Bernstein had the notion that you’re not really diversified unless you own something you’re uncomfortable with (http://www.vanguardblog.com/2009.06.26/ ... stein.html).

I completely agree.  This is one of those observations that has really stuck with me.

The idea of LT government bonds gives me a feeling in my stomach like I ate a tub of long-expired cottage cheese.  I am just never going to like these things, I think, no matter how good they are to me.  That's okay.  They probably hate me too.

To me, this proves that no matter how much you rationally might have accepted that you can't predict the future, some part of your brain never buys into it.  That's the part that activates my "fight or flight" instinct whenever I'm about to fill up my precious retirement accounts with 30-year government bonds. 

[Reub]

This is one advamtage of PRPFX. You get it all in one beautiful package, including long term bonds.

[KevinW]

Peter Bernstein had the notion that you’re not really diversified unless you own something you’re uncomfortable with

This really is a good point.  Personally I'm most uncomfortable with gold due to the no-interest-no-dividends thing.  However I realize that I am a by-the-book guy, which gives me a blind spot for when the book goes out the window.  I'm safer with the gold in there, even though it's most useful in scenarios I'd prefer to think will never happen.