Diversification: A Timeless Strategy

Turn on the business news or read a Wall Street research report and you’ll notice something: many people in the investment world will tell you where to put your money for maximum gain. Buy gold before it soars. Sell bonds before they crash. Or maybe speculate on this stock because it’s destined to go up. Like good comedy, the suggestion is that timing is everything. Do it right and you’ll be rich.

These dramatic predictions understandably generate headlines. But for the vast majority of investors, they really should be treated as no more than entertainment. Rather than attempting to time the market, a far better approach is to maintain a well-diversified portfolio. 

So, why diversification instead of market timing? Let us count the ways:

The Hare Gets the Headlines, the Tortoise Wins the Race 

You’re probably familiar with the age-old tale of the tortoise and the hare: the two are racing each other, and at first, the speedy hare takes a large lead. Over time, however, the slow and steady tortoise gains on the ever-tiring hare and ultimately wins the contest. Think of the hare as an aggressive market-timer, and the tortoise as the well-diversified investor. Sure, the hare gets the headlines, at least in the beginning. But over time, it’s the consistent tortoise that wins the race.