Does Diversification Still Matter?

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Taking a casual look at my investment performance over the last few months isn't pretty. What's that you say? Yours isn't either? It seems like no one's is. I was thinking about this the other day. Did I do everything right? I diversified. I have money in US stocks both big and small. I have money in foreign stocks. I have money in bonds (but only a little since I'm in my early 30s). I have money in REITs (again only a little). I even have a very small portion in peer-to-peer lending accounts like Lending Club. Looking back and everything only Lending Club made money. In fact it was the only thing that didn't lose around 30%.

So if diversification didn't help me, and I'm guessing it didn't help you either, should we just conclude diversification is a myth? I've come close to believing this at times. Each time I do, I take a step back and look at things in historical context. In 2001 when tech stocks were crashing would diversification have helped? You betcha! The real estate market was booming. While other stocks weren't performing greatly, you definitely didn't want to be all tech stocks.

What about the Great Depression of the early 1930s? I'm not a historian of the time period and I'm not sure how much diversification there was then (how would an average person invest in all the companies in Europe back then?). Still it seems that like universally bad across the board. Perhaps the best move was just to put money in your mattress.

Here's my conclusion: Diversification is like a seat belt. It's going to help you in most accidents. However, if you are in a Smart car and get into an head on collision with a Badonkadonk at 120 miles per hour, that seat belt might not save you. It doesn't mean you shouldn't still have one on to protect you from the other more likely scenarios.

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Posted on February 25, 2009.

Carnival of P2P Lending #9 – Cinco de Mayo Edition

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Happy Cinco de Mayo! In a few hours from now I'll be having tacos and maybe a cerveza. I draw the line at doing a hat dance. Grab yourself some nachos and chew on these articles about P2P lending...

Moolanomy spectulates why Lending Club has stopped taking new lenders. Interesting thought that "If they are successful, I believe they will emerge as the industry leader." I think Prosper already has a head start on Lending Club, so I think they'll just emerge as a stronger #2 than before.

Not to be outdone, Cash Money Life speculates on the future of Lending Club.

Prosper Lending Review tells you how you can buy your own P2P Lending company. I'm guessing that it's not going to come cheap.  I wonder if my credit score is good enough to get a loan on Prosper to buy it - just kidding.
Wiseclerk covers the launch of Cashare in Switzerland. It's similar to Prosper except that you have to submit paperwork for each loan.

The Prosper Blog notes the value in social capital in getting a loan funded. I've got more to say about this in the future - perhaps later this week.

RateLadder says that with the Fed dropping interest rates, buy a Zopa CD. It seems like you might even be able pay your loan back at negative percent if you can convince people to help you.

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Last updated on August 1, 2011.

Carnival of Personal Finance #150

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carnival-clown.jpgWelcome to the 150th edition of the Carnival of Personal Finance. It amazes me to see the 150 number there. I had grand notions of tying all 115 accepted submissions into a good story. However, with the Comcast outage in my area yesterday, I scrambled today to get all the submissions in the form that you see below. Though I wasn't always working at full speed, it took 16 hours to read the articles, write the blurb that you see below, and add my comments after most of them. If it took me 16 hours for just this, imagine the hundreds of hours these authors put in to write these articles for your enjoyment. When I say it like that how can you not read them, right? ;-)

Editor's Choice

Save Money

Investing

Retirement

Money Education

Real Estate

Debt

  • Me vs. Debt discusses building an emergency fund.
  • Advanced Personal Finance writes about student loan relief. Don't feel that you have to be advanced to understand. The basics are covered here, who should , why one should, and how to consolidate a student loans.
  • Discover Debt Freedom says don't worry about your credit score. My take is that it's true that you don't need to have a good credit score in life... but it's not an experiment I would want to try.
  • Destroy Debt writes about how she stretches her dollars. Lots of good tips here, but I'm not convinced about the advice to drop a cell phone - I see it as safety precaution in case a number of things happen, like your car breaking down.
  • The Wisdom Journal gives seven tips for living debt free. I'm not going to make my own laundry detergent any time soon either.

Money Stories

Work

Economy

Insurance

Entrepreneurialism

Credit

Other

Photo Credit: Ennor

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Last updated on August 1, 2011.

Carnival News

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I've got a couple of pieces of carnival news that may be of interest to other personal finance bloggers. (Readers who are not bloggers, might wish to move on or read about my new techno-lust.)

The Carnival of P2P Lending is looking for bloggers to host upcoming carnivals. It's usually a small carnival making it a very small commitment. The small size lends itself to a creative and entertaining carnival. Lastly, the Carnival of P2P Lending has a five day window from the last submission until it is due to run. This means you won't be up until 3AM the night before getting the last minute links in like you might with some other carnivals.

If you are a blogger and would be interested, simply leave a comment here or contact me. I will give preference to those who haven't hosted before - just to give everyone a chance.

In other carnival news, I'm hosting the 150th edition of the Carnival of Personal Finance next week. I'd appreciate your very best articles from the last week (two weeks if it's really good). Though the carnival is getting big to put into a theme, if you have an idea for it contact me. If I use it, I'll give you credit in the opening paragraph.

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Last updated on June 14, 2008.

Reminder to Bloggers: Submit Articles to the Carnival of P2P Lending

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It's time to submit any articles you have written about P2P Lending in April to the carnival of P2P lending. This edition's host will be Rocket Finance. I bet a lot of bloggers out there wrote about some big news that came out from a particular P2P Lending company.

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Posted on April 14, 2008.

Festival of Frugality – #112

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With over 80 submissions for this carnival, the competition was tough. If something didn't scream, "This is a way to save money", it didn't make the cut. I didn't want to single out any articles as being my favorites. I've found that the best frugal tips are the ones you can use. Instead, I tried to categorize the articles to assist you find a tip to help you.

Lists of Frugal Tips

Romance

Food & Groceries

Travel

Money Management

Health

Entertainment

General Tips (Uncategorized)

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Last updated on August 1, 2011.

Brip Blap hosts the 2nd Carnival of Peer-to-Peer Lending

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In case you missed it earlier this week, Brip Blap hosted the Second Carnival of Peer-to-Peer Lending.

I particularly liked Moolanomy's article about his second Prosper loan. I caution him to not judge Prosper until he has a fair sample size of loans. I believe that number to be at least 50.

There were a number of other good articles you would want to check out. The next carnival will be hosted at RateLadder.com

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Posted on January 24, 2008.

Call for Articles on Peer-to-Peer Lending

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The Carnival of Peer-to-Peer Lending is going to be hosted at Brip Blap in the next few days. The deadline for getting in submissions for that is today. If you are a blogger and write about peer-to-peer lending I encourage you to submit an article today.

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Posted on January 14, 2008.

Carnival of Peer-To-Peer Lending #1

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Welcome to the first ever edition of the Carnival of Peer-to-Peer Lending. For those unfamiliar with what this is allow me to explain it. The articles you see below are a collection of articles written by bloggers about the topic of peer-to-peer lending. If you are not interested in peer-to-peer lending, these articles below may be of little interest to you.

I want to thank everyone who participated in sending in an article. The next edition of this carnival will be hosted at Brip Blap. For those looking submit an article for this edition, you can do so here.

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Posted on January 4, 2008.

Announcing the Carnival of Peer-to-Peer Lending

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Now that I have some spare time, I've been trying to get a few projects off the ground. One of those projects is launching a Carnival of Peer-to-Peer Lending. Today, I can finally say that I've made some headway. I'd like to announce the Carnival of Peer-to-Peer Lending. The website currently is a little short on information. I'll be adding to it over time. I'm also using it as an opportunity to learn a new skill, the Joomla content management system.

I'm looking to post the first carnival on January 5th, which will include all the articles submitted up until December 30th. The plan is to post on the 5th and 20th of each month, while making the deadline of submissions the 15th and 30th of the month (28th for February). This will give hosts a few days to put together a Carnival, which in my experience is unique.

If you are a blogger and have written a recent article about lending money on peer-to-peer services such as Prosper, Lending Club, Zopa, Kiva.org, or any other similar site, I suggest you submit through the form here. This is a good way to highlight your writing and get a little traffic. I am looking for blogs to host the carnival in the future as well. If interested, please contact me.

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Last updated on August 1, 2011.

 
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