In this solo episode of Success That Lasts, Jared Siegel discusses why diversification is the key to reducing investment risks. He shares empirical evidence why relying on predictions is ineffective.
“Pessimism is not only more common than optimism, but also sounds smarter, is more intellectually engaging, and is promoted significantly more by financial media than an optimist, who is often viewed as oblivious and ignorant of risks,” Jared shares.
A 15-year study published by the Wall Street Journal found that 92% of active stock-picking managers that make investment decisions based upon their conclusions after looking at the economic predictors, actually underperform their benchmark.
The probability of being able to predict good performance in advance consistently is minuscule, just like the probability of continually and consistently making accurate predictions is impossible. Diversification is the very best way to reduce your investment risk.
“When it comes to your wealth, don't pursue a coin-flipping approach,” Jared says. “Rather, embrace five decades of peer-reviewed financial science and leverage the power of planning, not predictions, to support your long-term financial and life goals.”
Resources
Jared Siegel on LinkedIn | Twitter
DelapCPA.com
