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FYI: (Click On Article Title From Google) With all the investment options that advisers are pushing these days, you can easily get the impression that you are a slacker doomed to subpar performance unless your retirement portfolio is brimming with every asset imaginable. Regards, Ted https://www.google.com/#q=how+much+diversification+is+too+much+wsj
With a rollover from a 401k to an IRA, it gave me the opportunity to reconstruct my portfolio. So I've given this diversification thing a lot of thought. My conclusion was I am not diligent or knowledgeable enough to know the perfect mix of investments, nor do I want to spend the time trying to be. So, getting diversified in general terms and letting good managers do the rest seemed like the safe way to go. But as the article implies, what do you need to be diversified. I like the idea of seasoned managers/management teams with good risk adjusted returns, running focused funds with smallish AUMs making those decisions.
I decided on 3 sleeves, buckets, categories, 3 sections on a spread sheet, what ever name you give it, which felt right to me. I ended up with 14 funds in my plan. Could easily have been less, but there are so many good names to choose from. And I'll admit I was very influenced by MFO commentaries and data.
The break down being:
Allocation/balanced funds: 5 funds which I could argue was enough diversification in itself.
Equity funds: 6 funds, diversified w/ US, Int, and EM, but with a LC dividend focus.
Bond funds: 3 funds, a moderate risk multi-sector, conservative, MS, and a cash equivalent.
Low and behold, M* stats show pretty good diversification at about a 60:40 mix, which was my aim point. So, diversified I am - guess
And thank you David and Charles for doing much of the hard work in helping me reset my portfolio.
Its kind of funny that he writes about all the options advisors are pushing these days when its actually the media who do a lot of direct or indirect pushing to the public. There are many kinds of diversification and they address different kinds of risk. He's right that you don't need every new asset class that someone offers to increase their profits, Unfortunately his method of proving the point is highly suspect.
There are a couple of Warren Buffett quotes on the topic. One is: "Diversification is protection against ignorance. It makes little sense if you know what you are doing." Then there's the kinder, gentler one: "Wide diversification is only required when investors do not understand what they are doing."
Comments
With a rollover from a 401k to an IRA, it gave me the opportunity to reconstruct my portfolio. So I've given this diversification thing a lot of thought. My conclusion was I am not diligent or knowledgeable enough to know the perfect mix of investments, nor do I want to spend the time trying to be. So, getting diversified in general terms and letting good managers do the rest seemed like the safe way to go. But as the article implies, what do you need to be diversified. I like the idea of seasoned managers/management teams with good risk adjusted returns, running focused funds with smallish AUMs making those decisions.
I decided on 3 sleeves, buckets, categories, 3 sections on a spread sheet, what ever name you give it, which felt right to me. I ended up with 14 funds in my plan. Could easily have been less, but there are so many good names to choose from. And I'll admit I was very influenced by MFO commentaries and data.
The break down being:
Allocation/balanced funds: 5 funds which I could argue was enough diversification in itself.
Equity funds: 6 funds, diversified w/ US, Int, and EM, but with a LC dividend focus.
Bond funds: 3 funds, a moderate risk multi-sector, conservative, MS, and a cash equivalent.
Low and behold, M* stats show pretty good diversification at about a 60:40 mix, which was my aim point. So, diversified I am - guess
And thank you David and Charles for doing much of the hard work in helping me reset my portfolio.