Death of Equities 40th Anniversary

Money & Banking August 13, 1979, 12:01AM EST The Death of Equities How inflation is destroying the stock market On July 23 institutions that manage pension fund money began operating under a new and far more liberal interpretation from the Labor Dept. of what is a prudent investment under the Employee Retirement Income Security Act of 1974 (ERISA). Pension fund money can now go not only into listed stocks and high-grade bonds but also into shares of small companies, real estate, commodity futures, and even into gold and diamonds. “The decision throws the door wide open to hard assets for institutional investors,” says a jubilant Jack B. Backer, a New York diamond dealer. To millions of peopl

Diversification Means Always Having To Say You're Sorry

Diversification is unquestionably the anchor to designing an effective portfolio of investments. The idea is commonsense to all of us: Don’t put all of your eggs in one basket. Because we don’t know what’s going to outperform, we spread our bets across a variety of investments. The trick, if it is one, is that we need to consider how the price of each investment varies in relation to the others. Assuming they don’t move in lock step with each other, there is inherent benefit in owning lower-correlated investments. Doing so allows us to hold a more “efficient” portfolio, meaning either: (1) for the same level of risk, we can earn higher returns or (2) we can achieve a similar return level but

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