Buy and Hold Is Dead: How to Make Money and Control Risk in Any Market

Chapter 5. Since When Has Losing Less Become a Winning Strategy?

Slowly, the seemingly well-intended objectives of big brokers are becoming transparent. That's my intention. I want everyone to understand the benefits and consequences of these policies at all times. After a while, we will all begin to realize that the emotional ties levied by these firms can be avoided and used to our advantage instead. If nothing more, they surely can be anticipated and understood so as not to impact our proactive decisions or our intention to preserve wealth in the future. In fact, aside from diversification models, most of those ties are rather flimsy anyway, so we should use a more constructive approach as we move ahead.

However, diversification is a unique subject. It is extremely important, so we will need to address this in more detail. Portfolio diversification carries with it subjective consequences that prevent inconsequential escape. Diversification is required in all successful longer-term investment strategies, and it cannot be brushed aside. We must always be diversified regardless of our preexisting relationships, and diversification is supported by large financial institutions. Therefore, this subject should be addressed independently and in greater detail.

Specifically, the differentiation within normal diversification models should be observed. In fact, these differences often go overlooked. Asset allocation and balance are not the same, but brokers lump them together. Although they ...