Are you Diversified?

Ned Schmidt makes some excellent points in his article “Moneyization Part Thirty-one.” First he builds the case that you are not as diversified as you may think.

The foundation for retirement in the U.S. has two components, the 401-k plan at work and the equity in the worker’s home. Unfortunately, the retirement plan components, 401-k’s for example, are overwhelmingly invested in paper assets. Plan sponsors have in near universal fashion failed to adequately diversify the offerings for employee retirement plans. Offering “twelve” mutual funds invested in paper assets is not diversification. It is still all invested in paper assets, one and only one asset class.

Then he suggests why you are not better diversified.

Most disheartening is that despite the growing body of evidence that Gold, and other precious metals, should be included in a portfolio, corporate plan sponsors ignore the important diversifying effect of these assets. Often either of two factors are influencing this situation. First, and most bothersome, is that many consultants to retirement plans either are not familiar with the benefits of Gold or choose to ignore it as it does not add to the financial well being of the consulting firm. In short, Gold pays no fees or commissions to consultants. Second, many plans simply have fallen into the clutches of mutual fund companies in order to save money, and the mutual fund company does not provide a full range of diversifying funds.

Finally, he concludes with a simple formula to help determine how much Gold should be purchased to better diversify your portfolio.

How Much Gold To Buy
Value of retirement plan
plus value of your paper asset investments
plus reasonable estimate of home equity
minus Gold & Silver currently owned
Equals amount of Gold to buy

The article has some very compelling arguments that will appeal to your practical as well as your academic side.

 Are You Diversified?

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