Typical asset allocation models try to focus you only on the limited assets that banks or brokerages sell. The pervasive debate about “how much should you have in stocks vs. bonds?” is designed to get you to forget about other alternatives, such as real estate, life insurance, investing in a business or alternative cash flow vehicles. This is a problem because it increases your risk!
Additionally, stocks and bonds can subject you to MANY risks, including systemic stock market risk. Market crashes and corrections can bring sweeping losses to virtually every type of stock, yet typical financial advice tells you to subject MOST of your assets to the whims of the market. You’ve been trained to put your assets in stocks where a “diversified” portfolio won’t save you from a crash, correction, or bear market. (And note how the word “correction” minimizes this loss. We tend to think of a “correction” as a good thing—“a change made to something in order to correct or improve it,” says the Cambridge English Dictionary, as if losing 10% or 15% of an investment’s worth is somehow supposed to happen!)
Watch for our next article when we share with you a Better Model, a model that achieves greater balance and stability and better results for your money!
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