Asset Allocation Strategies

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I've spent time thinking about how IHUBers allocate their investments. Some members have little money to invest so I understand why they might go with a single stock or two. Over the years I've encountered IHUBbers who had no more than $50 in the market! (one guy referred to it as his "beer money" and he lost it all quickly!).

But some here, especially older investors *seem* to have ample funds to intelligently diversify over a number of stocks and a number of sectors. And yet they *marry* one or two stocks which is idiotic since very, very few investments outperform over long periods. Studies have shown that the vast majority of stocks -- even quality issues -- fail to beat money in the bank or T-bills over long periods.

Why don't they diversify? Almost certainly it's because they're seeking, usually unconsciously, lottery-like payoffs. 10-baggers. 100-baggers. They're craving thrills, not investment success. Diversification is the arch-enemy of the lottery-like return.

I've said all this before, but in these times diversification works its magic. My bonds are off maybe 1%. My bank CDs are more valuable than ever. And I'm damn glad I have a home.