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On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on how diversification is like a U.S. road trip. Larry begins by stating that in a world of uncertainty, diversification is the only prudent strategy. No one can know the future; therefore, it is wise to diversify across various sources of risks and returns. Larry continues by making the comparison of diversification to a U.S. road trip from New York to San Francisco. Imagine that in each leg of your trip you only travel half of the remaining distance. You are getting closer to, but not completely arriving at your destination. Each leg adds less distance.
Diversification works in the same way. The most important diversification is the addition of the right amount of fixed income to dampen the risk of the overall portfolio. This gets you halfway across the country. From here, each “leg” adds less value, but you’ve already gone almost the whole distance. Larry notes that typically 8-10 mutual funds are, at most, all you will need.
At Intelligent Investing, we strongly believe in diversification. We believe that it may not be best to own one thing to make a killing in it. However, by doing so, this may prevent you from not owning enough of any one thing to be able to get killed by it.
We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.
Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.
Larry Swedroe Bio
Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing.
In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations.
Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com.
Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp.
Larry holds an MBA in finance and investment from NYU, and a bachelor’s degree in finance from Baruch College.