Back in the day, 2007 to be specific, I thought I had learned all there was to know about diversification. I opened an account at Sharebuilder.com and began periodically investing in a well diversified (small cap, real estate, international, commodities, whole market) account. I thought I had built a decent diversified portfolio.
The table below shows the securities I purchased and the weights I applied to each security. It shows what would have happened IF the portfolio had reached $10K on 5/22/2007. By 6/30/2013, the portfolio would have been worth $8,834. It would have lost 12%. In contrast, the Dow, over the same period, gained 11%. Fortunately, I liquidated the entire account long before I had invested $10K; but I did lose money in it.
Bottom line on my efforts… DIA returned 11% vs -12% for my Sharebuilder account over the same time period.
Return to “Why Not A Diversified Portfolio“
