The Curious Investor

Asset Allocation: The Key to Proper Diversification

Not sure if I wasn't clear. But, in the sentence that you quote, I was referring to the 2000-2001 recession. The lesson taught to us in 2000-2001 was not to be overweight one sector. The lesson learned this time around (2008-2009) was more than that. It was that just being diversified within an asset class is not enough to insulate your investments from catastrophic draw downs. That's why I'm advocating looking outside of just equities (U.S. and global) and diversifying into other asset classes.


On Feb 16 07:36 PM cma cma wrote:

> "proper diversification likely could have avoided 40% losses caused
> mainly by one sector."
> Wrong, your own statistics show that only retrospective "proper diversification"
> could have reduced losses. If one had a market weight with "proper
> diversification" one would have lost 40% +.

Trading the Dow: What History Tells Us

Very good analysis and I like your more bearish argument in response to my post. I was trying to allude to the possibility of a longer term but I do believe that we'll see rallies in between which makes the Dow an interesting play both as a trade and a long term investment though with varying entry points depending on your personal investment horizon.

Also, I'd like to add a correction (as I seem to be doing a lot these days... must get better at proof reading), I mention that the Dow has traded up in "65 of the last 80 years" it should read "65% of the last 80 years."