01-27-2014,12:21 PM
If you seek returns and don't care about risk, follow bubbles.
If you seek stability at the risk of lower returns (smarter, in the long run), then diversity across return drivers.
That is not the same as diversification across markets, sectors, countries, or really anything - it is what it is - if something derives its return from X, don't invest in something else that also does.
Otherwise, then you have correlation - and even things that have relatively low correlation when times are good, everything like that goes towards full correlation during crashes.
So you want something fully non correlated.
The bigger issue then comes down to what your selection universe allows.
Traditionally, 401ks are limited to a small pool of options (and usually higher fees).
But the answer is rarely "oh, just do this - you are welcome" - it involves a lot of setup and adjustment for optimal returns (usually meaning avoiding drawdowns).
If you just set and forget, then just do indexes, and you get crushed on the crashes - but oh well, at least you don't pay fees (usually).
Just the right amount of way too much.
Don't make me assume my ultimate form.
Originally Posted by cegan09
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