Diversification

Discussion in 'Wealth Creation & Management' started by renovator, Apr 16, 2013.

  1. Midnight Man

    Midnight Man Member Silver Stacker

    Joined:
    Jul 16, 2011
    Messages:
    856
    Likes Received:
    0
    Trophy Points:
    16
    True enough, problem is in today's climate, I'd be loathe to throw a wad of fiat into a locked-in term deposit that will mature (knowing Murphy's law) a week *after* the haircut courtesy of your local bail-in provisions because the Bank of We'll Look After Ourselves Thanks was considered "too big to fail".
     
  2. TreasureHunter

    TreasureHunter Well-Known Member

    Joined:
    Oct 29, 2012
    Messages:
    3,114
    Likes Received:
    566
    Trophy Points:
    113
    Location:
    Treasure Island
    According to this, he doesn't listen to Kiyosaki (silver!).
     
  3. TreasureHunter

    TreasureHunter Well-Known Member

    Joined:
    Oct 29, 2012
    Messages:
    3,114
    Likes Received:
    566
    Trophy Points:
    113
    Location:
    Treasure Island
    It all goes down to how much wealth you have. And how much money you're willing to invest...
    If it's 5,000 $ or 10,000 $ or 50,000 $...

    The less you have, the more delicate issue this diversification is.

    If you're a lower-middle class person, then you'd better hold enough cash to be liquid - if needed. Anything that's a "plus" can be discussed: metals or anything else.

    I personally think if you have a bit more than "enough" and have already bought up metals, you can go into buying diamonds and other gemstones. Very delicate issue indeed.

    I personally like Kiyosaki's advice about real estate. Hold real estate and make it work for you like rent it out or re-sell or rotate your investments otherwise. Make money work for you... :D

    The more money you have, the more you can risk buying gemstones with, antiques.

    I personally think some bonds are also quite well-yielding: 5-10 % for 10 years, but there were plenty even above 10 %. And those economies were primarily emerging markets. Western bonds generally pay low and those economies have huge debt accumulate and the bond bubbles are blowing up...

    In conclusion - depending on the dimensions of your assets/wealth size, consider the following (when diversifying):

    -arable land (great asset, which some choose to rent out to agricultural companies)
    -buildings, homes (for real estate speculation)
    -venture capital (you might want to consider investing in start-up firms that look like they're "going to make it")
    -PM's (especially silver, gold, platinum, palladium)
    -gemstones (can hold a lot of value in small space)
    -antiques (you can speculate a lot with these, but re-selling might be difficult and you must learn a lot about them)
    -bonds
    ...etc.
     
  4. petey

    petey Active Member Silver Stacker

    Joined:
    May 19, 2010
    Messages:
    1,103
    Likes Received:
    7
    Trophy Points:
    38
    Location:
    Andorra
    Hypothetical:

    You have $200k and want to go 25%/25%/25%/25%.

    How do you get into real estate? REITS? Overseas property? Is there another way?
     
  5. trew

    trew Active Member Silver Stacker

    Joined:
    Aug 24, 2011
    Messages:
    3,810
    Likes Received:
    7
    Trophy Points:
    38
    Location:
    Melbern
    Depends if you own a place to live.
    If not I'd use the lot to buy a house and then gradually build up the other 25/25/25 over time
     
  6. Clawhammer

    Clawhammer Well-Known Member Silver Stacker

    Joined:
    Feb 26, 2010
    Messages:
    9,307
    Likes Received:
    76
    Trophy Points:
    48
    Location:
    Gone Fishin'

    $200k / 25% = $50k.... that's a deposit to leverage off on an investment commercial or residential property.
     
  7. Nugget

    Nugget New Member Silver Stacker

    Joined:
    Aug 16, 2009
    Messages:
    4,574
    Likes Received:
    3
    Trophy Points:
    0
    Location:
    Brisbogan
    Firstly apologies but I'm on my iPad so links & whatnot will be lacking

    There's Harry Browne's permanent portfolio. From memory 25% gold:cash:stocks:bonds. When I was doing my research on it it certainly appeares to work when back testing. The idea is you reweigh your portfolio at regular intervals (within a band). This way you take your "profits". Renovator wouldn't approve as MrBrowne didn't like investing in real estate for the permanent portfolio because it's not fungible.

    There are other similar ideas although Mr Brownes has the highest weighting to precious metals.
     
  8. REDBACK

    REDBACK Well-Known Member Silver Stacker

    Joined:
    Nov 22, 2011
    Messages:
    3,559
    Likes Received:
    354
    Trophy Points:
    83
    Location:
    Melbourne
    I personally see nothing wrong with the strategy of all your eggs in one basket.
    Its not for everyone but with a common sense approach liabilities can be limited to an acceptable degree..which of course is a subjective statement in itself.
    I don't see diversification as a superior strategy just the more commonly accepted one.
    A portion of my ex clients were all or nothing individuals seeing the failure of a business as just a stepping stone to the one business that would give them financial freedom for life.
    Each to the size of their own Kahoona's

    REDBACK
     
  9. Naphthalene Man

    Naphthalene Man Active Member Silver Stacker

    Joined:
    Feb 25, 2010
    Messages:
    5,290
    Likes Received:
    5
    Trophy Points:
    38
    Location:
    Hunter Valley, NSW
    I reckon get out of debt is the best advice at the moment. Take advantage of low interest rates. Forget other investments.
     
  10. petey

    petey Active Member Silver Stacker

    Joined:
    May 19, 2010
    Messages:
    1,103
    Likes Received:
    7
    Trophy Points:
    38
    Location:
    Andorra
    I'm getting itchy feet. Patience is indeed a virtue, depositing cash is unrewarding at current interest rates.
     
  11. renovator

    renovator Well-Known Member

    Joined:
    Jan 20, 2011
    Messages:
    7,410
    Likes Received:
    120
    Trophy Points:
    63
    Location:
    QLD
    Hey The End ..what happened with the new LPG system ?
     
  12. nonrecourse

    nonrecourse Well-Known Member

    Joined:
    Jul 11, 2011
    Messages:
    1,544
    Likes Received:
    56
    Trophy Points:
    48
    Location:
    Melbourne Australia

    VVVVVVV I reckon you will end up on the pension with no debt :p If your average your bloody aweful
     
  13. Holdfast

    Holdfast Well-Known Member Silver Stacker

    Joined:
    Oct 15, 2009
    Messages:
    9,491
    Likes Received:
    717
    Trophy Points:
    113
    Location:
    Australia
    The military build-up in the North should see prices boom.

    Consider getting on-board with DHA.

    A tleast with them, you get Guaranteed rent, a decent property and generally very good folk who rent the homes.

    https://www.dha.gov.au/investing
     
  14. thanatos0320

    thanatos0320 New Member

    Joined:
    Sep 16, 2014
    Messages:
    10
    Likes Received:
    0
    Trophy Points:
    0
    Just out of curiosity how do you guys go about diversifying your stocks?
     
  15. Revils

    Revils Active Member Silver Stacker

    Joined:
    Jun 20, 2013
    Messages:
    905
    Likes Received:
    62
    Trophy Points:
    28
    Location:
    Australia
    Different industry sectors mostly. So not all in banks or IT or Health or Mining etc.
    Looking at diversifying with international stocks though.
     
  16. smk762

    smk762 Active Member Silver Stacker

    Joined:
    Sep 5, 2014
    Messages:
    1,333
    Likes Received:
    2
    Trophy Points:
    38
    Location:
    Westralia
    The larger your spread, the lower your exposure. My spread is 20% shares, 20% cash, 20% PM, 36% business, 4% charity.

    In shares, 10% AU, 10% international, across all sectors, percentages fluctuating while shoring up on the undervalued and selling off the overpriced.

    Cash is all AU at the moment to provide liquidity, but I'm studying up on Forex and will migrate into 10% AU, 10% international as time goes on.

    PM is 5% gold, 15% silver, 0% paper.

    Biz gets the bulk as it's only in the second year and still growing. As it's performance improves, I'll move the half the profits into property (commercial and/or agricultural. Will consider urban when the bubble bursts).

    Charity gets a small piece of the pie to keep me honest. I'm not a fan of doorknockers and tin shakers, because their organisational overheads significantly reduce the actual amount that ends up being used on the advertised project. My preference is to look for more direct methods like - https://www.indiegogo.com/projects/hopeful-packs-for-the-homeless or actually planting a few trees etc myself and writing off the cost of doing it (travel, time etc.). Generally not tax deductible, but better value for money even with that factored in.
     
  17. boston

    boston Active Member Silver Stacker

    Joined:
    Jul 7, 2009
    Messages:
    3,915
    Likes Received:
    6
    Trophy Points:
    38
    Location:
    Australia
    Kudos +1 :)
     
  18. thanatos0320

    thanatos0320 New Member

    Joined:
    Sep 16, 2014
    Messages:
    10
    Likes Received:
    0
    Trophy Points:
    0
    What I like to do is form peer groups between the industries then go and look at a few things to actually see if that firm can be included into that peer group. After I figure out who is in the peer group I use the average of that peer I will compare firms I'm analyzing to that peer group. Sometimes a company who looks like they are in a certain peer group may not actually be in that group at all.

    Some of the things I may do is:
    look at a firm's annual reports to see their key competitors
    Use industry trade publications to identify key competitors
    Check their sources of demand, and check to see if they have similar sources of sales and earnings.

    I then pick out some stock that I like and figure out the correlation coefficient between those stocks then multiply those efficients by my portfolio weights to get my portfolio correlation. Anything close to -1 or 1 is bad and anything closer to 0 the better (but that's almost unlikely to happen because of systematic risk aka market/undiversifiable risk. Finding the correlation between your stocks will show you if you're actually diversified.
     
  19. petey

    petey Active Member Silver Stacker

    Joined:
    May 19, 2010
    Messages:
    1,103
    Likes Received:
    7
    Trophy Points:
    38
    Location:
    Andorra
    Index funds.
     

Share This Page