Diversifying your
investments is like boarding up your windows against an approaching hurricane. It gives you some measure
of protection, but isn''''t going to prevent the roof from falling in.
Diversification is one of the fundamental and unquestioned rules of investing. It''''s supposed to protect you from huge losses. But what if it doesn''''t? You could be facing potential disaster. Could conventional wisdom be so wrong? And if it is, what can you do about it?The idea behind diversification is intuitively compelling. If you spread your
investments around, chances are not all of them will get hit at the same time or with the same severity. But it''''s not a bulletproof vest. You don''''t necessarily get off injury-free. And the flip side is that when the markets are going strong, your gains are somewhat curbed. But giving up some upside is well worth the price of not losing your shirt in a free-falling market.Or so the theory goes. The only problem is, it doesn''''t work anymore. Or at least you can''''t count on it working. Just look at the sharp January 22 correction and you''''ll see what I mean. When the U.S. market slipped the week before that, so did markets in Europe, Asia, the sub-continent, and Latin America. And the slide continued the following Monday, when the U.S. markets were off because of the Martin Luther King holiday. For a few days, even gold and silver fell. Oil didn''''t escape. Nor did blue chips, tech, and small caps. In other words, practically everything went down................
For more on this article and similar others visit
www.befinallyfree.blogspot.com