Blending Vs Diversification
Blending -The superior alternative to diversification
Why diversification hasn't worked
The debate has gone on about what is the best way to protect your investment? Many investors have used the philosophy of diversification to try to protect their nest egg when the market goes down. The idea is to split up the investment into two groups. One side is invested into the aggressive side of the market trying to capitilize on the growth. The other portion is sitting in safer accounts expecting to grow during the years the market is down. The problem is the safer accounts have lost money as many times as the aggressive accounts, leading to a less profitable portfolio. There’s several years where the safe accounts lost money the same year the market lost money as they’re both tied to market conditions. Compared to blending where the safe side isn’t tied to the market.
"Diversification is protection against ignorance. It makes very little sense for those who know what they're doing." - Warren Buffett
Blending fixes the two biggest issues investor’s have when diversifying their portfolio. The first issue is trying to determine what ratio of their portfolio should be in the aggressive side. A common ratio would be an 80/20 portfolio where 80% goes into stocks and 20% goes into bonds. The more that goes into the safer side, the more of a long term loss the investor is conceding right upfront. The safer it is, the lower the return. The second big issue that occurs is when the market is unstable what do they do? The question becomes whether to keep their money in the market or drop it all into a safer more stable account. Where should the money go?
Why is this the best method?
Combining your money to work together
Dividing your money to work independantly
Blending is combining the best of all worlds when it comes to investing
Solving the biggest problems with diversification, blending is generating better and safer returns. It does this by fixing the two biggest issues. Firstly is that you no longer need to decide where to put your money in an unstable market. Blending takes the investment and places it all into a strong growing safe account that isn’t impacted by those conditions. Be that as it may, there are no losses and the growth is similar to that of the Stock Market. Secondly,with the investment growing like an Oak tree, slow and steady, he can then reuse the same dollars to invest simultaneously, into another opportunity. This is safe leveraging by using the only accretive (gradual growth) asset on the planet. The investor no longer decides if they invest in a safe option or in a riskier option. They can invest into both getting a better and safer overall return.