Unfair Advantage 6. Diversified Portfolio Most people are not diversifiedâ€”they are de-worsified.
The four basic asset classes in the world of investments are shown in the asset column of the financial statement below. INCOME STATEMENT Income
BALANCE SHEET Assets
Business Real Estate Paper Assets Commodities
Most people who believe they have a diversified portfolio are not diversified because they are primarily in only one asset class: paper assets. Paper assets are made up of stocks, bonds, mutual funds, ETFs, insurance, annuities, and savings. Again, they are not diversified, they are de-worsified. Even more hideous, mutual funds by definition are diversified, made up of a basket of different stocks, bonds, and paper assets. When a person has a diversified portfolio of mutual funds, he or she is beyond diversified. When the stock market crashes as it did in 2007, most of the paper assets crash in unison. This is why even Warren Buffettâ€™s mutual fund, Berkshire Hathaway crashed in the crash. 133
by Rich Dad, Robert Kiyosaki