In the Fall of 2007 I was quite confident my investments were adequately diversified and in some cases "professionally managed" . Fifteen months later I was down about 25%. It was little comfort that the S&P was off about 56%. I'd seen major drops before in the crash of 1987 and the dotcom bubble burst. What went wrong this time? First, a willingness to accept big losses. Second, pseudo diversification. There was a greater correlation between the returns of different asset classes such as equities and bonds as well as different regions and countries. I didn't want to go through this again-- changes had to be made. Almost sublimely I adopted the goal of getting a return greater than a bank CD or Treasuries with less volatility than the S&P 500. Years ago my brother-in-law built a business around this basic concept. I believed in the concept then; the failure was one of implementation.
Whatever vestiges of the "buy and hold" mentality that were still floating around the old noggin were eradicated. I briefly pin balled to the other extreme and did some day trading. It wasn't for me but at least it didn't cost me anything to find out. We'll get back to time frame another day, but let's just say I'm now more than willing to panic if need be.
I've been on a hunt for different investments. The term du jour is alternative investments. I took larger or new stakes in precious metals, commodities, and non US currencies. My appreciation for dividends increased and I learned a bit about Master Limited Partnerships, Royalty Trusts, and oil tanker companies. If a farmland ETF came out I'd take a look.
Results of this new framework have been satisfactory. I'm mindful it's been a period of rising prices for nearly all assets. The test will come when the turn comes. All I can say is the antennae are on full alert.
