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Diversification: Preserving Wealth
Diversification is not having every dollar invested in one single asset.
Ted Turner orchestrated the Time Warner AOL merger at the height of the technology boom (officially filed on the 11th February 2000) with the result being a personal fortune of over US$9 billion.
The tech wreck and subsequent collapse of the Time Warner AOL share price crushed his personal fortune down to US$360 million.
I can still remember watching an interview with Ted Turner where he was asked the question, ‘…how could you lose so much money?’ and his reply was ‘…I did not diversify‘.
Ted Turner was lucky, he was still left a millionaire after the collapse although he had been a billionaire but the moral must be that you should always seek to diversify both across different asset classes such as shares and property and within an asset class.
The attached is an example of what would have happened if you only invested and held the top ten largest Australian listed companies versus the top ten largest in the United States.
A lot of money would have been forgone.
WARNING, past performance is no guarantee of future performance and most importantly, the above comments do not constitute Personal Advice.