• ABOUT – DICK YOUNG
  • YWMF – ARCHIVES

Young's World Money Forecast

Since 1978 With a 32 Year Vacation

  • DICK YOUNG
    • FROM RICHARD C. YOUNG
    • THE FINAL INTELLIGENCE REPORT
  • INVESTING STRATEGIES
    • RETIREMENT COMPOUNDERS®
    • GOLD & SILVER
  • DIVIDENDS & COMPOUNDING
    • MIRACLE OF COMPOUNDING
    • DIVIDENDS
  • GRAHAM & RUSSELL
    • BEN GRAHAM
    • RICHARD RUSSELL
  • THE DOW AND THE LEADERS
    • DOW vs. S&P 500
    • DOW vs. DOW DIVIDEND PER SHARE
  • WELLINGTON MANAGEMENT COMPANY
  • YOUR SURVIVAL GUY
  • BANK CREDIT & MONEY
  • THE PRUDENT MAN

Witness the Raw Power of Diversification

September 13, 2019 By Richard Young

Diversification isn’t only a tool to minimize losses when assets fall in value, it has the power to actually increase your return while lowering risk. Here’s how I explained it in December of 2015 (with the chart and associated text updated to 2017):

Calculating the Efficient Frontier

You need to look at your asset deployment from the top down, focusing on diversification between stocks and bonds. My Efficient Frontier display shows you the power of diversification. Note the left-to-right uphill slanting curve that initiates with a position of 100% bonds and terminates with a position of 100% stocks. We have made our calculations using the Merrill Lynch 7-10 Year U.S. Treasuries Index and the S&P 500 total return index from Young Research for the period of 1977– 2017. We calculate the Efficient Frontier by using annual returns and assuming annual rebalancing.

Draw 1% per Quarter

Where is your best fit along an Efficient Frontier? To answer, you must first establish your ability to absorb risk in the hunt for returns. For decades I have written that in retirement, your target should be a 1% per quarter draw from your portfolio, and not a penny more. This does not mean, however, that you should not position yourself to potentially exceed 1% per quarter returns. Your actual return over any quarter will be controlled largely by the climate of the financial markets at the time, which neither you nor I control. And the climate itself will be determined by the stage of the economic and monetary cycles. I have studied these cycles over five decades and keep you updated regularly. The winter stage of the upside economic and monetary cycle is here, to be followed by a period of discomfort in the economy and the financial markets.

If you need help creating a well-diversified portfolio, fill out the form below. If you do, a trusted senior member of my family run investment counsel team will contact you. You will be offered a free, no-obligation portfolio review and an explanation of how we can help you achieve your investing goals.

Related

Filed Under: Investing Strategies

Compensation was paid to utilize rankings. Click here to read full disclosure.

RSS New From Young Research & Publishing

  • Your Survival Guy: Learning the Rules of Life
  • BIDEN’S AMERICA: Foreign Investment Fell to $151 Billion in 2024
  • U.S. LNG Projects and Market Shifts
  • Canada Faces Major U.S. Tariffs as Trade Disputes Intensify
  • Your Survival Guy: JAWS, Woods Hole and YOU
  • New U.S. Magnet Plant Announced in Multibillion-Dollar Defense Deal
  • Trump Slaps 50% Tariff on Brazil
  • Billionaire Mining Entrepreneur Praises Trump’s Copper Tariff
  • Your Survival Guy’s Boat-Shoes-on-the-Docks View
  • Would the Pat Buchanan Plan Work Today?

RSS New From Your Survival Guy

  • Your Survival Guy: JAWS, Woods Hole and YOU
  • Time Stands Still: Against the Current
  • Are Private Equity’s Excess Returns Disappearing?
  • Your Survival Guy: “You Wouldn’t Have Liked It”
  • ESG Doesn’t Stand Up to Scrutiny
  • WARNING: Your Survival Guy and Gal in the Fog
  • Survival Guy: An All-Weather Balanced Portfolio
  • A Bazooka Fired at Private Equity
  • NYC, Crypto, ESG, the Haves and the Have-Yachts
  • Beware the ‘Democratization’ of Investing

Search Our Site

Richard C. Young & Co., Ltd.

–Client Letter Sign Up–

Sign up to receive email alerts when our latest client letter is posted on our website.

Copyright © 2025 · About Dick Young · Terms & Conditions

 

Loading Comments...