Demystifying Diversification

Chris explains investing diversification with some analogous side trips to the worlds of food and nature.

He starts by illustrating the importance of perspective, emphasizing the need for many decades of data in backtesting.
Next, he covers the ingredients, or asset classes and styles, most investors will use to diversify.

With the ingredients in hand, he explains what happens when we mix them, and how mixing ingredients that are substantially different can improve the return we get for any given level of risk.

He then covers the real-world implications for accumulators and retirees and finishes off with some fine tuning tables and thoughts on the discipline needed to be a meaningfully-diversified investor.

[noveltyrobot]

Merriman and his band of merry men have changed my life. Thank you so much to the whole team.

PS: Chris, I would love to be half the teacher you are some day.

[gabrielenicolini]

Hi All - I always follow you with great interest. Thank you. To me this is the best presentation and Q&Q session you ever delivered through this channel. So clear and informative. Bravi, Complimenti!

[oceansunsetak]

I used Fidelity portfolio performance to look back on my diversified porfolio 12 years. SP 500 clear winner by far. since 2019 SPY etf almost doubled the return of VBR and VTV. been retired 5 years and last years sold bonds for treasury money markets and bought VTI for simplification. No doubt when or if Fed lowers interest rates small cap value will take off.

[mere_cat]

I kind of think the investors who are like the Northern Fulmar bird at 55:45 won't do well in an S&P fund either. In the 2000s, these investors would have sold out and gone to cash, or switched over to emerging markets right at the point when they were at their highest in 2007. You can't really win by trying to time whatever is the hottest thing. The best approach is to follow Chris's advice and then DON"T PEEK at your portfolio, or at least stop measuring your performance against the S&P 500! Heck, even 10% small cap value is way more diversified than the S&P alone.

[BB-cskk]

Are there similar TDF charts with flexible withdrawals % (4-6) without adding inflation adjustments to annual withdrawals. Thanks Chris for the outstanding work.