"Give portions to seven, yes to eight, for you do not know what disaster may come upon the land."
This verse states that nobody can not predict the future and can not predict when an investment will run into a problem. Since we do not know the future the best way to keep you portfolio on a more even keel and in the correct direction is to diversify into 7 or 8 investments rather than have a single investment.
In today's terms this has been called Modern Portfolio Theory. Here are some specifics on this theory.
- Harry Markowitz won Nobel Peace Prize in Economics in 1990 for his theory published in 1950.
- Principal of Co-Variance: Risky higher returning investments, each having their own variance, when combined in certain amounts will have an overall lower amount of risk and maintain higher returns.
- Example: Blend of International and US Equities give a better return and lower risk than just US Equities alone.
- Why is this important? Because money moves between stocks and bonds and between different parts of the world.
A Nobel Peace Prize winner has proven that what the Bible documents makes really good sense.
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