Hi Everyone,

I did an analysis of one of my client’s portfolios for the period of July 1st 2007 through June 30th, 2008. As we all know, the past twelve months have been an ugly period with the Dow Jones down 16%, NASDAQ down about 12.5% and the S&P 500 down just under 16%.

The portfolio I looked at is highly diversified, geared toward some income generation by using high-yielding dividend paying stocks. Even tough the result is certainly not great, the portfolio is down 9% over the same period, beating the individual indices handsomely. My client is also invested in alternative investments, i.e. investment outside the financial markets, and with those he was down about 3%.

The reason for writing this is to reemphasize the importance of diversification, as I teach all my clients and write about in my book. Spreading the risk is the best thing you can do for the health of your portfolio.

Obviously staying in cash would have been the right way to go, and we certainly had some cash in the portfolio. Since predicting the markets is not possible, staying all in cash would have been a risk as well.

Cheers,

Patrick