Diversification

[Boghie]

72Zorad,

I believe in asset allocation and diversification.

However, you are attempting to 'invest' in a time that is very abbynormal.

Asset diversification - with frequent reallocation - probably helped during the crash. It definitely helped by increasing the total number of equity shares owned if one did not lock in losses. But, did that strategy help more than a big picture timing of the market.

In 2007 and early 2008 the market seemed excessively frothy. So a 'market timing' approach gave you about a year to make a move to safety. Not a very hard move, eh. The March 2009 reentry point was harder - but, reentry any time from March through July netted the 'market timer' much mullah. And, you can play with percentages - you don't have to swing 100%. Just adjust allocations. That strategy, to, increased equity share count. Regardless, I don't actually think this is what folks talk about when they talk about market timing.

However, to your basic point, markets and assets are starting to move in tandem again. Bonds moving with stocks moving with gold moving with commodities moving with... Not quite there, but getting there. Not normal.

Starting to feel very 2008,
Starting to feel very bad.

 

[Bullitt]

Tom Keane called out a guy on the radio a few days ago because when he asked him what to do right now, the guy said, "investors should keep a diversified portfolio". (The company line so to speak.) Keane actually got a bit fired up and I liked that.

The thing with diversification is hedge funds, prop desks and HFT's have such a leveraged presence in the market that they have aborted the modern portfolio theory. Diversification still lost money in 2008-2010, but maybe just 5% less than someone 100% C. When it's going down, it's going down. Gold is tracking the dollar now- explain that one gold bugs.

 

[Frixxxx]

I'm no investing guru so bear with me here....

The bottom of my mattress is starting to look pretty appealing

Thoughts?

I usually use the term Diversification for Investment engine.

TSP is one of my investments.
I have Traditional IRA.
Roth IRA
Municipal Bonds
Savings

Some people think diversification is P&G stock vs. Mattel stock or Large Cap vs Small Cap.

Diversification should be based on risk tolerance. The less risk, the more diversification.
That's how I see it!

So yes, you are limited in a fashion with just TSP funds!

 

[72Zorad]

I'm no investing guru so bear with me here....

You always hear that you need to diversify. Seems to me, in watching the market that we really don't have much diversification in our TSP markets. When the European markets start sliding you can see an almost exact parallel even though we may be experiencing relatively good news. Same thing happens to the European markets when we have bad news and of course the same is true when positive things happen. The European bailout caused a (I believe) 5+% gain in our markets. Seems that at this point the markets and monies are so intertwined that the only diversification we have is G, F, and everything else....

The bottom of my mattress is starting to look pretty appealing

Thoughts?