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Diversification

• Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner

Diversification is not defined as having every dollar invested in one single asset.

Can still remember Ted Turner orchestrating the Time Warner AOL merger at the height of the technology boom (official filed 11th February 2000) with the result being a personal fortune of over US$9 billion.

The subsequent crash and collapse of the Time Warner AOL share price crushed his personal fortune down to US$360 million.

Later he was asked in an interview how he could you lose so much money and his reply was simple ‘…I did not diversify‘.

Ted Turner was lucky, he was still left a millionaire after the collapse although he had been a billionaire but the moral must be that you should always seek to diversify both across different asset classes and within an asset class.

The attached table lists the top three performing stock markets in the World over the past 30 years.

Guess how many times the Unites States came first?

Click for table.

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