A blog by Eric Dahl
Expect 20%-30% of your portfolio to go in the wrong direction on a weekly or monthly basis. This is the both the necessity and virtue of diversification that not everything go the same way.
Over the past six months, our expanding economy has driven investors from the safety of high quality fixed income investments into the potentially higher returning stock market. Although we have shortened maturities on our bond positions to preserve capital, the benefit of maintaining the bond allocation is evident with the natural disaster in Japan and the selloff in worldwide markets.
Chronic federal budget deficits here and abroad have begotten central bankers to become money printers as they buy their own burgeoning, uncontrollable treasury debt. Gold, silver, and other commodities have become de facto currency alternatives, buoying their price to all time highs. A 5%-15% allocation to hard assets offers insurance against irresponsible governments and budget shortfalls.