Diversification

[winston]

Summer Reading: Portfolio 'Ingredients' by Craig L. Israelsen.

The 7Twelve portfolio is a completely strategic portfolio design. Strategic portfolios are built and managed by following preset guidelines that are not affected by whim, opinion or market gyrations.

A strategic portfolio is often viewed as a more "passive" approach to investing because it does not imply, or rely upon, skill or market timing. Rather, a strategic portfolio relies upon commitment to the recipe and adherence to the preset guidelines. Strategic portfolios set a course and follow it.

The opposite of strategic is tactical. A tactical portfolio is much more dependent on skill, opinion and luck. A tactical portfolio has a flexible set of guidelines that can change based on market conditions or opinions of the manager. A tactical portfolio may change course at any time.

As a strategic portfolio, the 7Twelve recipe follows three simple guidelines:
1.Select 12 different "ingredients" or mutual funds
2.Equally weight the ingredients
3.Rebalance periodically

Each of the 12 mutual funds in the 7Twelve portfolio is assigned an equal allocation of 8.33%. The 7Twelve portfolio includes eight equity-based mutual funds that create an overall equity (stock) allocation of approximately 65% equity (66.6% to be exact). Four fixed income funds create a total fixed income (bond) allocation of about 35% (33.3% to be precise).

http://www.thestreet.com/story/10835863 ... ients.html

[winston]

WHY YOUR PORTFOLIO MIGHT BE "SUPERCONCENTRATED"

Today's chart is a reminder of a major trend nobody is talking about… one we're calling, "Stocks or commodities… what's the difference?"

You see, most folks view a position in commodities like crude oil or copper as a way to diversify their wealth away from stocks. And oftentimes, it is. But these days, stocks and commodities have joined at the hip to form one huge "risk on, risk off" trade. This trade rises and falls according to the state of global economic growth.

For a picture of this idea, we present a chart plotting the performance of benchmark commodity index CRB (the black line) since September alongside the performance of the benchmark stock index, the S&P 500 (the blue line). As you can see, the two indexes are exhibiting the same trading pattern… and sport the same gains since the market bottomed last fall.

This incredible correlation is worth keeping in mind when studying your portfolio. If a big "risk off" selling whim strikes the market, both stocks and commodities will decline. And that "diversified" portfolio you thought you had? It will turn out to be "superconcentrated."

www.dailywealth.com

[winston]

CHART OF THE WEEK: THE BIGGEST TREND NOBODY'S TALKING ABOUT

With this week's chart, we once again highlight one of the biggest trends nobody's talking about… the tremendous correlation between stocks and commodities right now.

You see, most folks take a position in commodities like oil, copper, coal, and cotton with the idea that it will act as a portfolio diversifier. And often, that's what it does.

But in the past year or so, stocks and commodities have become joined at the hip… and are trading in one massive "risk on, risk off" trade that moves according to sentiment toward global economic growth.

For a picture of this trend, we present a performance chart of the benchmark commodity index, the CRB (black line), over the past 18 months, plotted against the performance of the benchmark stock index, the S&P 500 (blue line). The spike in oil prices has pushed the CRB a bit more in the past month, but you can still see these two indexes have moved up and down in lockstep since mid-2009.

We state once again: If you've taken a commodity position in the past few years thinking, "I'll diversify my portfolio with resources," think again. You're not diversified… you're "super-concentrated."


www.dailywealth.com

[winston]

CHART OF THE WEEK: THE MOST IMPORTANT CHART NO ONE IS TALKING ABOUT

This week's chart is one from the "broken record" department…

Over the past year or so, we've often noted a giant trend you almost never hear about… the tremendous correlation between stocks and commodities right now.

Many investors take a position in commodities like copper, coal, oil, sugar, corn, and cotton thinking they're diversifying their portfolio. This is often the case.

But since the 2009 bottom, stocks and commodities have become joined at the hip… and are trading in one gigantic "risk on, risk off" trade that moves according to sentiment toward global economic growth.

You can see this trend in the two-year performance chart below. It charts the performance of the benchmark commodity index (black line) against the benchmark U.S. stock index (blue line).

You'll note both asset classes sport nearly identical returns… and similar ups and downs. We highlight this trend again because it's an EXTREMELY IMPORTANT thing to keep in mind when constructing an investment portfoilio.

We keep it in mind when we answer the "should I buy stocks… or should I buy commodities?" question with, "There's no difference." Any "risk off" downturn will clobber the entire thing.

www.dailywealth.com

[winston]

Be careful if you have been buying Commodities to diversify away from Equities. They have actually been moving in the same direction ..

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CHART OF THE WEEK: IT'S STILL "RISK ON, RISK OFF"

This week's chart is an update on one of the biggest trends you don't hear about in the mainstream financial media…

Most folks see an investment in commodities like oil, copper, and sugar as a way to diversify a portfolio. And sometimes, that's a valid idea. But as we've mentioned many times in the past year, it's just not the case these days.

Our chart this week shows why it's not the case. It displays the price fluctuations and gains in the benchmark CRB commodity index (blue line) versus the gains in the benchmark S&P 500 stock index (black line) over the past two years. As you can see, the two are rising and falling at the same pace, in the same "up and down" fashion.

Looking at this, we once again remind readers: Stocks and commodities are moving in lockstep in response to the Fed's big "goosing" efforts of the past few years. A position in one is virtually the same as a position in the other. It's all just "risk on, risk off" these days.

www.dailywealth.com

[winston]

CHART OF THE WEEK: STOCKS AND COMMODITIES ARE STILL "RISK ON, RISK OFF"

Our chart of the week provides an update on a giant trend you'll rarely hear about – how stocks and commodities have become a big "risk on, risk off" trade.

Many folks take a position in commodities like crude oil, copper, sugar, and corn because they think they're diversifying their portfolio. And that's often the case.

But in the past few years, stocks and commodities have joined at the hip to move in lockstep with each other. They now move up-and-down with investors' beliefs about global economic growth.

You can see this extraordinary "correlation" with our chart below. It graphs the performance of the benchmark S&P 500 stock index (black line) and the benchmark commodity index (blue line) over the past 2.5 years.

As you can see, stocks and commodities have moved in the same up and down fashion and have posted the same returns.

So when asked the question, "Should I buy stocks or should I buy commodities?" one can only keep this trend in mind and reply with, "What's the difference?"


Source: www.dailywealth.com

[winston]

RISK OFF!

If you think you're diversified right now, think again. An important trend we've been highlighting in these pages is still going strong… The trend is the extreme correlation between stocks and commodities right now.

To recap, many folks take a position in commodities like crude oil, copper, sugar, and corn because they think they're "diversifying" their portfolio. And that's often the case.

But in the past few years, stocks and commodities have joined at the hip to move in lockstep with each other. They now move up and down in the same fashion, at the same rate… according to beliefs about global economic growth.

This development turns "diversified" portfolios into dangerous superconcentrated bets. We now live in a world that's either "risk on" or "risk off."

For much of the past few years, investors have made solid gains with the "risk on" strategy. Stocks and commodities have soared. But as you can see on the right-hand side of our "performance chart," stocks (black line) and commodities (red line) jumped off the cliff together and plunged.

If you're wondering, "Should I buy stocks or should I buy commodities?" keep this trend in mind and ask yourself, "What's the difference?"


Source: Daily Wealth

[winston]

TOL:-

Did your "Diversication Strategy" protect you this round ?

"Hedging" is more effective in times like this ...

[winston]

TOL:-

So did your Diversification, managed to save you from this rout ?

[millionairemind]

TOL:-

So did your Diversification, managed to save you from this rout ?

Diversification works back in the times before all the markets are interlinked...

Now you pull one hand, the other leg moves...