Tag Archives: iShares

The Power of Effective Diversification

Diversification is one of the most misunderstood concepts in investing.

If you read a good explanation of the strategy, you’ll learn that the goal of diversification is to combine different investments that tend not to be driven by the same factors in the economy. So when one investment lags, the others in the portfolio gain ground (or at least will be unaffected)

For example: Combining gasoline stocks with bicycle manufacturers in your portfolio. When gasoline is cheap, people drive more and bike less. When gasoline prices start to rise, people usually cut back on their driving and start biking to work. Either way, your portfolio is now less exposed to the risk of a downturn in demand for either bicycles or gasoline. Continue reading

Is Your Home Still A Good Investment?

Dr. Robert Shiller, the renowned Yale professor and creator of the S&P Case-Shiller Housing Index, recently made several dire announcements about the short-term and long-term prospects for the housing market. Asked for his prediction on housing prices in a recent interview, Dr. Shiller reported that prices might fall another 10% to 25% in the next few years. (Shiller also acknowledges that forecasting the direction of the housing market is as hard as predicting the weather and that we are in uncharted territory on a range of fronts.)

The Housing Market: A History of Poor Performance

Let’s set aside the short-term housing predictions and focus on long-term issues.

Dr. Shiller analyzed the financial benefits of home ownership from an investor’s point of view. His research found that housing prices did not outperform Continue reading