Asset Diversification and Extreme Money Scripts


stock market

2008 Flashback

In late October, 2008, the fear had set in.  A writer from Newsweek chose to report on the edge of positivity but, really, there was none to be found.  Everywhere you turned, there was more bad news.

Even the run on foreclosed properties had a downside.  The article reports that foreclosed owners often left feces on doorknobs and banisters.  That’s a reflection of the anger level of homeowners that had to abandon their homes. Many were on the verge of bankruptcy.

Financial meltdown

The “Ownership Society” rallied by President Bush was meant to include every American into the homeownership club.  That went down in flames, taking the rest of the country with it.

Today’s first topic is asset diversification

I promised to talk about asset diversification and I know you’ve heard of this.  You may feel a yawn coming on.  I know, it’s not very exciting.  What is exciting is knowing that your hard-earned investments won’t be wiped away in an instant if “Wall Street” makes a bad decision.

My favorite asset allocation plan is from Tony Robbins’ Money: Master The Game and is based on the four different economic cycles.


Prosperity – Stocks

Recession – Cash

Inflation – Commodities/Gold

Deflation – US Treasuries


Economic growth rising:


Corporate bonds


Inflation rising:



Economic growth falling:


TIPS (Treasury Inflation-Protected Securities)

Inflation falling:

Treasury Bonds



I matched my portfolio to each of the scenarios and found that I’m deficient in the gold/commodities and TIPS categories.  The T-bond category is represented but not in the long-term bucket.  There’s my new direction and it’s meant to shield against an inevitable turning tide.  While my stocks have been doing really well lately and I’ve spent the last three years investing in stocks religiously, I can’t fool myself into thinking that the good times will last forever.


Here are some other ideas.  I found this in an article on WiseBread.  The article suggests sectors that are not highly correlated with the S&P 500.  Therefore, if the stock market takes a dive, these sectors will stay steady.

Utilities – not highly correlated with the S&P 500, so they will withstand a harsh downturn:  Vanguard Index Utilities Fund (VUIAX) or an ETF, iShares Global Infrastructure ETF (IGF).

Materials – Steel, mining or chemical producers, also not highly correlated with the S&P 500; Vanguard Materials Index Fund (VMIAX) and Fidelity Select Materials Portfolio (FSDPX).

Telecommunications – High dividend payers, such as Verizon, AT&T, and T-Mobile.  I own AT&T and add to it whenever I have some extra cash.

Energy – Oil prices aside, companies like Exxon and Chevron invest in alternative energy sources where there’s a huge global demand.

Consumer Staples – Companies that provide basic household goods, such as Procter & Gamble, Johnson & Johnson, and Unilever tend not to suffer tremendous downturns.  Everyone needs their basic items.  Vanguard Consumer Staples ETF (VDC) and iShares Consumer Goods ETF (IYK).

Small and mid-cap stocks – Next to the blended domestic and international index funds of the largest companies, you want to invest in small and medium-sized companies, where the potential for growth is higher.  Some choices are Vanguard Small Capitalization Index Fund Investor Shares (NAESX), T. Rowe Price Small Cap Fund (OTCFX), Vanguard MidCap ETF (VIMSX) and T. Rowe Price Midcap Growth Fund (RPMGX).

After losing a large sum in the 2008 financial meltdown, I am apprehensive of a repeat performance.  Bankers can be reckless.  Last time it was home loans, this time it’s student loans.

Back then I had a strategy with great intentions.  I was chasing dividends to boost my IRA balance.  After reading many articles on REITs and drooling over the dividends, I set up a heavy REIT ownership and waited for the dividends to pour in to reinvest them into more shares.  Everything was great until it wasn’t.

I really should have known better at the time.  Like driving in the rain, I went past a few caution signs that I didn’t take notice of.  In the summer of 2007, before Lehman went bankrupt and the real crash occurred, two Bear Stearns hedge funds went bankrupt.  Most people don’t take this as a point of reference, but to me, that was the beginning of the financial market collapse.  What followed could not be good.  As a former Bear Stearns employee, I should have heeded that warning.  But I was naïve and not educated in asset allocation, thinking that the worst could not come to pass.  That’s right, I held on to everything.  My REITs crashed and burned before I sold out.  To this day, my $23 – $27 REIT stocks are still below $10 a share.

I am heavy in stocks, which works for me now.  But if those stocks crash, my portfolio balance will suffer.  My retirement days are getting closer, thank heavens, and I would rather use these years to beef up those thin areas and round out my portfolio.

Because I am emotionally attached to what I own now, I will be using new money, not re-allocating what I have.  Fault me if you feel differently, but that’s my direction.


Today’s second topic is extreme money scripts

Do you hear yourself saying any of the following?

According to Dr. Brad Klontz, these are five of the top 10 most common money scripts that contribute to self-destructive and self-limiting financial behaviors.

1. More Money will Make Things Better

Even Dr. Phil says, you don’t solve money problems with money.

The real problem with this frame of mind is not the lack of money, but the lack of money management skills.  Therefore, the same poor money management skills will be directed at a larger sum of money.

People think that more money will make them happy when it’s been known through research that happiness and money level out about the $50,000 – $75,000 income range.

In addition, more money tends to amplify a person’s character, not alter their life.  If a person is a nice person with little money, they will be that much nicer when they have more money.  If someone is miserable and grumpy with little money, they will still be a miserable and grumpy person, but just have more money to their name.

2. Money is Bad

This is having contempt for money.  I knew someone that lived this one to a “T”.  He went on and on about “the rich” and expressed disapproval or envy when someone spent money on things that he felt was out of his reach.

People that believe that money is bad will never have any.  It reminds me of the saying, “If you think you can, or you think you can’t, you’re right.”  Thinking that money is bad almost guarantees that they will block their efforts to have any.

3. I Don’t Deserve Money

This belief is held by those with low self-esteem.  Maybe they were told they didn’t deserve anything in life.

These individuals generally remain underemployed or will sabotage opportunities to have more money.  They limit their happiness by not being able to enjoy what money can bring them, therefore, they remain spiritually bankrupt as well.

4. I Deserve to Spend Money

This belief stems from entitlement and is the cause of overspending.  When taken to the extreme, it prevents an individual from placing any boundaries on their consumption.  As a result, the person will always be spending more they make or living paycheck to paycheck.

5. There Will Never Be Enough Money

This belief originates from a feeling of insecurity and lack and is the opposite of #4.  When we believe there will never be enough money, we set ourselves up to live a life of deprivation and to experience constant anxiety, insecurity, and fear. Those who grew up in poverty may internalize this money script.


Are any of these scripts driving your money actions?


Join me next week to learn about the financial planning field and fiduciary responsibilities and low, medium, and high-risk investments.


Leave a Reply

Your email address will not be published. Required fields are marked *