Protection Through Diversification

When you first the see the video I know you’ll have mixed feelings. This is because Cramer’s personality is fairly divisive. People tend to either love him or they hate him, with not a lot of in-between. However, regardless of your personal thoughts, I have to admit the guy really knows his stuff.

The video at the bottom of the page essentially covers two topics, diversification and “doing your homework”, both of which are equally important, but for different reasons.

The concept of diversification is fairly simple,  but can trap those who try for a cursory understanding. Diversification is merely owning a variety of stocks across several industries so that your risk is not entirely concentrated in one sector. So, owning Spring, T-Mobile, AT&T and Verizon is NOT a diversified portfolio. You merely own four telecom stocks. Owning  telecom, aerospace, bank and retail stocks would be an example of diversification.

Doing your homework refers to engaging in proper research before, during and AFTER you own a stock. Research being reading analyst reports from S&P, Morgan Stanley or any of the other many analyst companies. And then also listening to EVERY recent quarterly conference call held by management.

You want to do this before you buy, for obvious reasons. Then you also want to do this when you own the stock because this keeps you well informed. Then, surprisingly, you’ll want to stay informed after selling the stock. Given you know the company pretty well, there could be the chance to buy the stock again, or even short it, depending on what occurs after you sell.

Before finishing, above I mentioned that diversification throws people off. This is because diversification is not the same as the concept of asset allocation. Yes, the above portfolio would be a diversified holding of stocks, but all you still own are stocks. You don’t have other assets such as gold or bonds, which tend to be uncorrelated. So, you are protected from general market gyrations, but are still fully exposed to the vagaries of the market.


  1. Do your homework
  2. Diversify your portfolio
  3. Own more assets than just stocks, and protect them too!

Structured Settlements vs. Lump Sums

Do you ever day dream about winning the lottery? Or maybe getting lucky and striking a big insurance claim? Well, chances are you’re familiar with the options of receiving a lump sum or a stream of payments that is meant to be of equal value, but spread out over time. As tempting as it is to take all the money at once, I believe

Life insurance companies, which often issue settlements structured as annuities, are subject to strict regulations and are evaluated for their financial strength by independent rating agencies. They also maintain rigorous capital and reserve requirements. When providing injured persons with a tax-free, guaranteed income stream tailored to meet their needs, structured settlements will continue to offer unique advantages.

Safe Regulated Safeguards

Insurance companies are regulated by each state in which they do business. The number one goal of state insurance regulators is to protect policy holders by ensuring that insurers are financially sound and able to pay
claims on the policies they issue. State insurance laws require that all insurers establish reserves for every obligation they assume. In fact, each of the state-mandated safeguards helps enhance an insurer’s ability
to pay claims and helps protect policy holders.

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Rich Dad – Poor Dad

I really enjoy this video. It’s from the author of “Rich Dad, Poor Dad”. It’s a wonderful book which describes some personal finance secrets for earning and keeping your assets. In this particular video, Robert Kiyosaki describes some of his asset protection techniques to deter lawsuits. He has made MILLIONS of dollars and, if we believe him, is a common target for lawsuits.

While not entirely relevant to our asset protection theme, he also goes over the current state of the legal system. I find it pretty interesting. He says it has nothing to do with fairness, but whether you can afford to defend and represent yourself. This is why it’s important to get good advice. Having good intentions isn’t enough to protect yourself. Anyway, listen to the video for more good advice.