Investing in the BibleНамуна

Solomon actually left us with some amazing investment advice about proper diversification in Ecclesiastes 11:2. It is fantastic that the Bible has specific advice about diversifying, but it gets better…

I just finished reading this book by Robert Katz in which he was talking about this same verse of scripture mentioned above. Robert goes on to talk about a recent study that was done comparing a variety of asset allocation (or diversification) strategies over the last 37 years to see how they compare…

”Dr. Israelsen had decided to study various asset allocations, such as a one-asset portfolio (all cash), two-asset portfolios (cash and bonds), three-asset portfolios (cash, bonds, and large U.S. stocks), etc., up to seven-asset class portfolios. He also studied traditional portfolio mixes, such as 60 percent stocks and 40 percent bonds, or 40 percent stocks and 60 percent bonds. He studied a total of ten possible portfolio combinations. He then compiled statistical data on each portfolio for the last thirty-seven years to see which would produce the highest return on your investments with the lowest amount of risk. Here is the truly amazing part that was like an arrow of revelation hitting me as I read his study. The absolute best portfolio allocation, providing an average yield of 11.25% over thirty-seven years with the lowest standard deviations for risk, was the portfolio that included all seven assets. In fact, with this portfolio, the chance of losing 10 percent or more of the value of your portfolio in any one year was zero.”

So there you have it! A Biblical plan for diversification that greatly reduces risk while performing well!