Diversification Vs. Vegas

Since few of us have inherited fortunes via a long lost relative, with no spouse or children to unload those millions on, haven't we tried to create our own fantasy? Uncle Stocks whisks us away to a world of money and visions of wealth. Snap out of it! Aren't we really just gambling when we put our money into the stock market? Don't we know what the words "paper losses" mean? Robert Shiller, an economist at Yale, gave an example of a house appraisal at $400,000 one week and the same house appraising at only $350,000 the next. " In a sense, $50,000 just disappeared... but it's all in the mind." People, we didn't lose anything unless we sold the house at $400,000, deposited $350,000 in the bank, and got robbed on the way home (losing $50,000 cash). Some "Vegas Grannies" stop at slot machines, but they have a set amount they are willing to gamble because they plan prior to the trip. They keep their money "close to the vest" and are keenly aware that groceries and medicines will have to be purchased and bills will have to be paid. Let's live like that. If we are going to gamble then we can't whine. If we insist on playing the stock market then we should plan to lose it all; any gains will just be a welcome surprise. Diversification is the key to success. Go out there and explore your options!

Zanne Booker 10-11-08

Note: Portfolio diversification is the key to financial (and mental) tranquility.