Diversify Your Diversification
By Keith Bunn Jr.
February 10, 2014
Recent events have made me realize that I've talked about mutual funds, stocks and bonds, 401K's, Roth's, etc... but I haven't really talked about what percentages we do, in our own investing. Whether it is in our 401K's or anything else. It is all the same percentage.
Diversify, Knowledge, and Long Term
Remember, whenever you are going to invest into anything, there are 3 things you need to do every single time without exception.
1) Diversify Your Investments: By diversifying your investments, you help lower your risk. Because if one of your investments go down in value, others maybe going up to counter the drop.
2) Don't Invest into Anything You Don't Understand: If you invest into something you have no clue about, that just leaves the door wide open for you to lose all your money. Don't do something just because I, or anyone else told you to do something. Learn for yourself if it's a good investment or not.
3) Be a Long Term Investor: Don't do any investing, of any kind, unless you are willing to leave the investments alone for 5 years or longer. The people that lose their shirts more often are the ones who are contently pulling their money out of the investments because there was a dip in the market.
Investments and Percentages
With that being said, I'm not going to tell you specific investments we're investing in. You need to learn and decide for yourself what kind of investments are right for you and your family. But I will tell you the types and the percentages we are investing in.
In a blog series I wrote last April, Investing: How to Lower the Risk, part 1-5, I talked about all the different kinds of investments we can invest in, as well as why or why I didn't think, they were good ones to invest in. If you read that series, you already know that we invest only in mutual funds. For the most part, a good portion have a good to great long term track records and in each fund, there are roughly 90 to 200 companies you're investing in, which makes just one fund well diversified. And in the open market, there are hundreds of different types of mutual funds to choose from.
So out of hundreds, which ones do we choose? We only invest into 4 types of mutual funds. 25% into Growth (Mid Cap), 25% into Growth & Income (Large Cap), 25% into Aggressive Growth ( Small Cap), and 25% into International (Global). Now "Cap" means Capital or company. So when I say "Large Cap", that means that you are investing into large companies.
Growth or Growth Stock funds are medium size companies that have had some growth to them and are still expanding. Growth & Income funds are large companies that are more established. Aggressive Growth funds are small companies that are the most volatile. International means exactly what it says, you are investing into companies that are owned overseas. Global, means that not only are you investing in companies that are overseas, but there are some U.S. companies mixed in there also.
With your investments spread out into these 4 types of mutual funds, slow, steady, aggressive, and overseas, you are diversifying your diversification and you can find them in all kinds of retirement programs, from 401k's to Roth IRA's. But remember, investing in the stock market is like a roller coaster ride. There are going to be some ups and downs, as well as some loop-to-loops from time to time. Don't freak out when you start to go down that big hill. It will go back up. They always do! Enjoy the ride!!
This will probably be my last blog posting here on this blogger page. I'm in the process of setting up a NEW website that will now host my blogs from now on.
I have been and will continue to transfer all my old postings over to my new site. I have 8 more posts that I want to transfer over before publishing my website.
My new site address is www.cavusfinancialcoaching.com. I will continue to transfer my old postings over as well as add new ones, so visit often. I'd also appreciate any feed back on my new website in order to make it as useful as possible.
Thank you all for your loyalty over the past 3 years. My goal is to continue to do better in order to help as many people as possible with their finances!
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