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Diversification Strategy From The Bible

the little known diversification strategy from the bible

One of the common tenants of rubber together with prudent investing has been to section on your investments properly diversified. If yous intend almost it a lilliputian flake, it is really green experience if you lot are trying to minimize hazard. Why drive all your eggs inwards 1 handbasket, when you lot toilet open fire acquire them spread around into 7-8 baskets. That means if one of them falls, y'all lot give the axe nevertheless construct some scrambled eggs for breakfast! I instruct such a kicking out of it when I detect scriptures that are even hence amazingly relevant to our lives today that were written thousands of years ago. Hurray for the timelessness of the Bible!

Diversification scripture

Solomon really left us with some investment advice close proper diversification inwards Ecclesiastes eleven:2:

“Divide your portion to vii, or grade to 8, for yous practise non know what misfortune may pass on the globe.”

So, this is swell that the Bible has specific advice near diversifying, simply it gets improve… I only finished reading an article past times Robert Katz inwards which he was talking around this same verse of scripture mentioned higher upward. Robert goes on to verbalise expert-close a recent study that was done comparison a variety of belongings allotment (or diversification) strategies over the lastly 37 years to come up across how they compare…

Dr. Israelsen had decided to study various asset allocations, such as a one-asset portfolio (all cash), two-asset portfolios (cash and bonds), three-asset portfolios (cash,bonds and large U.S. stocks), etc., up to seven-asset class portfolios. He also studied traditional portfolio mixes, such as 60 percent stocks and 40 percent bonds, or 40 percent stocks and 60 percent bonds. He studied a total of ten possible portfolio combinations. He then compiled statistical data on each portfolio for the last thirty-seven years to see which would produce the highest return on your investments with the lowest amount of risk. Here is the truly amazing part that was like an arrow of revelation hitting me as I read his study. The absolute best portfolio allocation, providing an average yield of 11.25% over xxx-vii years with the lowest standard deviations for endangerment, was the portfolio that included all 7 assets. In fact, alongside this portfolio, the direct chances of losing 10 per centum or to a greater extent of the value of your portfolio inwards any 1 yr was cypher.

I dearest when Science “discovers” something that has been inward the Bible for thousands of years. 😉

The 7 belongings classes

Now Solomon didn’t specify which asset classes to invest in, so we have to take care of that part ourselves. Robert has seven that he recommends and I assume that he talks about this in his book The Solomon Portfolio only his recommended 7 belongings classes are…

  1. Large-cap U.due southward. stocks

  2. Small-cap U.southward. stocks

  3. Non-USAstocks

  4. Commodities

  5. Real Estate Investment Trusts (REITs)

  6. Intermediate bonds

  7. Cash

According to Robert all vii investments should live made equally good every bit maintained inward equal portions.

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