Recession Lessons: Diversification Still Works

The Great Recession prompted many pundits to declare much of the conventional investment wisdom null and void.  But not so fast.  An analysis by brokerage house T. Rowe Price (see the article starting on page 15) makes a compelling case that a properly diversified portfolio, including stock market exposure, is still the best route to long-term investment success.

The company also demonstrates the value of staying the course during tough times, comparing the results of an investor who pulled out of the market during the worst of the recession, putting all of his invested money and future investments into U.S. Treasury bills, vs. an investor who stayed in the market and kept putting money into stock-based investments (see article starting on page 18 using the same link as above).  The stock investor experienced continued short-term pain, but within months was way ahead of the more conservative investor.

Of course, all investment decisions should be made within the context of your age and goals.


2 Responses to Recession Lessons: Diversification Still Works

  1. Matt Bell February 25, 2010 at 12:21 PM #

    Dear Puddin –

    I appreciate you taking the time to write. And I agree with your sentiments about trusting God, being wise, and doing your own research. However, diversification is a solid biblical principle (Ecclesiastes 11:1-2); fear is not.

  2. Puddin February 25, 2010 at 7:21 AM #

    Hi. If you are a Believer, you should be telling folks the truth about money, not this drivel about ‘diversification’. The USD has had it:there will be no reason to ‘save’ for retirement because no one will be able to.

    God, Food/water, Gold and Guns are the only priorities. Its thinking like yours that misleads.

    Anyone reading this-trust God, be wise, and do your own research. The things happening in the world are not accidental.

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