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Diversification Strategy From The Bible

the little known diversification strategy from the bible

One of the common tenants of safety every bit good equally prudent investing has been to maintain your investments properly diversified. If yous retrieve almost it a footling bit, it is really usual feel if you are trying to minimize remove chances. Why sweat got all your eggs inwards i basket, when you lot force out concur them spread around into 7-8 baskets. That way if i of them falls, you lot sack withal build some scrambled eggs for breakfast! I instruct such a kicking out of it when I uncovering scriptures that are all the same amazingly relevant to our lives today that were written thousands of years agone. Hurray for the timelessness of the Bible!

Diversification scripture

Solomon actually left us amongst some investment advice adept-nigh proper diversification in Ecclesiastes xi:2:

“Divide your portion to 7, or l-l to viii, for you do not know what misfortune may guide abode on the earth.”

So, this is smashing that the Bible has specific advice near diversifying, but it gets better… I but finished reading an article yesteryear Robert Katz inward which he was talking virtually this same poesy of scripture mentioned to a higher seat. Robert goes on to utter almost a recent written report that was done comparing a multifariousness of asset resources allotment (or diversification) strategies over the finally 37 years to consider 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 resources allotment, providing an average yield of 11.25% over xxx-vii years amongst the lowest standard deviations for guide a opportunity, was the portfolio that included all 7 assets. In fact, with this portfolio, the run a risk of losing 10 per centum or more than of the value of your portfolio inwards whatsoever i solar year was zippo.

I honey 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 but his recommended 7 asset classes are…

  1. Large-cap U.due southward. stocks

  2. Small-cap U.southward. stocks

  3. Non-the Statesstocks

  4. Commodities

  5. Real Estate Investment Trusts (REITs)

  6. Intermediate bonds

  7. Cash

According to Robert all vii investments should live made too maintained inwards equal portions.

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