Hugh Bromma, Entrust Group07.23.08, 3:30 PM ET
Conventional wisdom implores us to fill our retirement accounts with conservative index funds, but we live in a world where a $10,000 investment in the S&P 500 10 years ago would today be worth … about $10,000.
That’s right, in 10 years’ time the vaunted index is flat, and companies like Fannie Mae, Citigroup, American International Group and others once regarded as rock solid are today off their highs by 60% and more.
The problem for many people is that concentrating investments in just one or two asset classes, like stocks and bonds, is inherently riskier than spreading investments across a broad-based group of asset classes that would include commodities, real estate, notes and private placements. This is real diversification, and it has the effect of reducing the overall volatility of one’s investment portfolio.
