Posts Tagged ‘diversification’

Google Diversifies Its Empire…

Wednesday, May 11th, 2011

robot-army.jpg
(credit: Sougent Harrop)

…with robot cars!

We’re always prattling on about the importance of diversification around here. You know, the “don’t put all your eggs in one basket” philosophy, applied to your investment portfolio. (If you don’t believe us that a diverse portfolio is the way to go, take the Timing the Markets Challenge!)

Well the same principle can apply to all areas of life – baskets of eggs, for example, or Internet empires like Google’s. They’ve been branching out from their humble search engine roots for years (email, document sharing, voicemail), but now they’re taking it to the streets. With robot cars.

Robot cars, as you might imagine, are currently illegal on U.S. roads. But if Google does a good job lobbying the Nevada legislature, then Sin City may become the first market for automated overlords vehicles.

Hey, if the Internet implodes some day, at least they’ll have something to fall back on.

Hawaii Pushes the “Emergency Marketing” Button

Wednesday, April 6th, 2011

We all know by now how much the earthquake and ensuing tsunami in Japan have affected its economy and the foreign companies that depend on Japanese-made components for their products.

But something we hadn’t really thought enough about is how the disaster affects where Japanese people choose to spend their money. It seems obvious now, but Japanese tourism to Hawaii has dropped by a full 25% since March 11th. That’s a big deal for the Hawaiian tourism industry, which is now spending $3 million on “emergency marketing” to woo travelers from other nations.

See what happens when you put all your eggs in one basket? Diversity really is more than just a corporate buzzword. (Full disclosure: we hate the word “buzzword.”) In work, school, government, AND your investment portfolio, diversification can protect you from unpredictable events and their domino effects.

Fortunately, Hawaii still has plenty of appeal to pasty New Yorkers like ourselves, who are happy to contribute to the state’s critical tourism revenue stream.

Barring an unforeseen volcanic eruption, that is.

A diverse investment portfolio. With butter and sprinkles.

Thursday, December 23rd, 2010

cookie-allocation.png

from Let It Dough! by Christoph Niemann (NYTimes)

You can invest in lots of different things – stocks, bonds, mutual funds, currencies, cows. (For real! They’re called commodities and they’re really weird.) And you can invest in this stuff in the U.S. or in almost any country in the world.

But here’s the trick: you want to have a diverse mix of all these things, so you don’t lose all your money if, say, the U.S. economy crashes or all the cows go on strike.

Diversification is a way to reduce that risk by creating a portfolio with a wide mixture of different investments. In basic terms, it means “don’t put all your eggs in one basket.”

Mmm. Sprinkles.

Investment Advice From A Banker’s Deathbed

Wednesday, December 1st, 2010

Some people would shatter under the weight of Gordon Murray’s diagnosis. But he channeled his remaining energy into creating a legacy.

  • In 2008, former Wall Street bond salesman Gordon Murray was diagnosed with brain cancer. Five months ago he decided to end his treatment and write “The Investment Answer.”
  • After 25-years of high-level jobs on Wall Street, Mr. Murray says he suddenly realized that everything he knew about investing was wrong. Actively managing (tinkering with) investment portfolios, he says, is useless at best, and harmful at worst.
  • Even as an experienced financial player, Murray found he didn’t actually know much about asset allocation. He learned the ropes in firms like Goldman Sachs and Lehman Brothers, which valued risk and bravado over safety and simplicity. His book, full of simple investment advice, is aimed at investors who are in the same position he was.

Facts & Figures

The five choices Murray says every investor needs to make:

  • Only work with financial advisors who earn commission from you – not mutual funds or insurance companies
  • Diversify! Keep your money allocated between stocks and bonds, big and small, and value and growth
  • Make sure to include foreign investments to guard against economic disasters in the U.S.
  • Be skeptical of actively-managed funds… even experienced fund managers can’t predict the future of the market
  • Rebalance – sell your winners, buy more losers. It’s painful, but improves your returns in the long run

Best Quote

“It’s American to think that if you’re smart or work hard, then you can beat the markets.” – Gordon Murray

Stop Crying, It’s Hurting Your Portfolio

Wednesday, November 25th, 2009
If investors just trusted classic investing strategies instead of getting so emotional, their portfolios would be much better off…
  • A new study found investors are making two big mistakes: 1) they get too emotional about their investments and make hasty decisions, and 2) they assume recent performance dictates future performance.
  • The study also explained that the most classic investment strategies – asset allocation and portfolio rebalancing – would help investors avoid these mistakes.

Facts & Figures

  • Over the past 2 years, a basic portfolio with conservative asset allocation and annual rebalancing dropped by only 3.5% compared to a 30% S&P drop during the same time.
  • During a boom, a basic portfolio with conservative asset allocation and annual rebalancing returned 8.3%, not so much less than 9.7% for the S&P.

Best Quote

“People spend all their time looking at the trees and not the forest. It’s the forest that’s important, and that’s asset allocation.” – Gary P. Brinson, Chicago-based Asset Manager

Diversification is…

Saturday, April 25th, 2009

Diversification is a way to reduce risk by creating a portfolio with a wide mixture of different investments. In basic terms, it means “don’t put all your eggs in one basket.”