[caycep]

some thoughts:

isn't S&P index by definition diversified?

And the the other question is, yes the S&P had a rate of -1.5% but considering the crashes of the past decade, would you be lucky to achieve -1.5% return rather than something much, much worse?

[tnicola]

Yes, the S&P is diversified in the stock portfolios. What I meant was diversify into things like fixed income vehicles, first mortgage securities, real estate income trusts etc.

And yes again, most investors came out much worse over the past decade that -1.5%, but even the theoretical return is dismal enough to illustrate the point.

Negative returns, while a simple concept, can be a real jaw dropper for many a DIY investors. If you invest $100.00 and lose 10%, you'll have $90. But $10 out of $90 is 11%. So you'd need to return more in the positive just to make your money back. And the greater the negative return, the greater the positive required. If you lost 20%, you'd need 25% etc.