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What is the greatest risk facing investors who fail to diversify their portfolios?

David Wiedemer


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Video Transcript

Why not just ride the wave and just keep assuming stock markets will always go up? Well, that is what investors are thinking now. I mean, that is what polls investor sentiment are telling you is that most retail investors, not like the seven billionaires who've recently said the market's overvalued, but most retail investors think that the market will just keep going up. Why not? Well, if it was going to keep going up forever, well, there would be no risk, but we certainly know it's not and I know and can make a pretty good case that its being pumped up by the government both money printing and both money borrowing. What happens is none of these people get out. Nobody gets out in time, even professional investors don't. I mean, time after time you can see studies when markets go down professional investors just ride them down. Whether it's Warren Buffett or it's your local mutual fund manager, they just ride 'em down and they don't get out. They'll tell you it's hard to time the markets. Well, it is and that means no easy way to time the market when it goes down. Now what they'd say is, "No problem. When it goes down it always goes back up," but this time is different. You've brought in the U.S. government to pump this bubble up and when it goes down it ain't coming back up once the U.S. government can no longer push it back up. In 2008, that would have happened earlier. That would soften the blow later on. People say, "Well, how can we reduce the impact of the aftershock when it had happened in 2008 and 2009?" Well, it would have been a big blow. If you didn't have the government come in with printed money and massive borrowed money to pump it back up. Only down side is that ultimately if you play this market long-term, and it could be years that this market goes up or doesn't go down, you're not going to get out in time. You're not going to get out and I don't just mean you, because you're a retail investor, very few professionals ever get out in time either. They just say, "Well, look, I was also in at the low, because I fell all the way to the bottom and I came back up," but that's always assuming this market comes back up, which normally it would if it wasn't for the fact that the government has now intervened to pump up the bubble. That is deadly.