Spreading It Around: Diversification and Variety

It’s the finance equivalent of not putting all of your eggs in one basket. Diversification is usually associated with risk management in investing. You invest in a variety of financial instruments because different investments don’t move together and are affected by different factors. Ideally, all investments are always increasing in value, but most investors will never be that lucky. With diversification when some investments are decreasing in value, others are increasing. You are protected not only from the risk of taking devasting losses, but from the psychological roller coaster an undiversified portfolio may take you on.

You can diversify with different asset classes by investing in real estate, stocks, bonds, and cash. In addition, it’s prudent to drill down and diversify within asset classes: commercial real estate and residential real estate, technology stocks and energy stocks, or corporate bonds and municipal bonds.

How can the average person diversify? Start by buying a house rather than renting. All of the money that goes toward you dwelling is then an investment. Open a bank account with savings and checking and store some money there to act as your cash investment. An additional benefit here is that your money is a bank account has FDIC federal protection. You will never lose it.

Then open up an online account with the investment management company Vanguard to invest in stocks and bonds. Vanguard provides a number of diversified products which do the work of inter-asset class variety for you. For example, Vanguard offers a Total Bond Market Index Fund (ticker symbol BND) and a Total Stock Market Index Fund ETF (ticker symbol VTI).

One interesting aside, and contrary argument, could be formed around the incredible advancement of large-cap technology stocks since 2008. If you had invested only in Apple, Facebook, Microsoft, Amazon, and Google at that time you would likely now be very rich. Even today its hard to not consider this approach. These are clearly five of the largest, most successful, and talented companies in the world today.

A chart comparing the share price advancement of these companies since 2008 indicates that they don’t really move together. But, as enticing as this strategy sounds most investment professionals would agree that this this lack of diversification would put the investor in a precarious and vulnerable position.

Diversification is also important in food and eating as it helps to manage your risk of illness. The easiest and most intuitive way to integrate all of the nutrients (both micro and macro) that your body needs into your life is to consciously purchase and consume a wide, diverse variety of fruits and vegetables. Each vegetable provides its own particular subset of nutrients. Rice, corn, and beans topped with avocado slices, and garnished with lime and cilantro provides you with a (delicious) full set of all macronutrients because of the diversity of nutrient subsets.

What’s especially straightforward is that nature supplies you with a simple method for insuring that your diet is diversified: color. Eat a wide variety of different colored fruits and vegetables and there’s your nutritional diversity. Naturally, some colors tend to be a little more nutrient-dense (green) and some foods supply an especially rich mix of nutrients (so-called “superfoods”) but color variety is an exceptional starting point.

How about exercise? Is diversity important in your workout regimen? The answer is a resounding “yes” and the reason why is because your physical being, your body, is made up of different muscles and systems and needs to be able to comfortably make all kinds of different movements. When you vary your workouts it’s a guarantee that your body will be tuned to function at its highest level while you manage your risk of injury.

Exercise can roughly be broken down into three complementary areas: aerobic (running, walking, swimming, biking), strength (weight training, bodyweight exercises), and flexibility (stretching). Flexibility and strength training work and stretch your muscles, joints, ligaments, and tendons; while aerobic exercise conditions your heart, lungs, and circulatory system. While aerobic activity is most essential you need the diversity of all three types of exercise to maximize your workout benefits.

To wrap it up I’d like to recognize that diversity in all of its forms is not only the correct approach to diet, exercise, and investing it will also provide you with a higher quality of life. You will feel better and be better. Diversify.

Focus on Food: Roasting

While it’s usually affiliated with meat, roasting is an essential technique that anyone can use to be more plant-based and incorporate more vegetables into their diet. Roasting is surrounding food (uncovered) with hot air and is usually accomplished in an oven. With a light coating of extra-virgin olive oil and a little salt and pepper roasting can bring out the flavor and sweetness in all kinds of vegetables: Brussel sprouts, cauliflower, sweet potatoes, carrots, bell peppers, mushrooms, eggplant, asparagus, squash, etc.

Focus on Exercise: Aerobic Fitness

Exercise should be an essential element in any healthy lifestyle. Exercise can roughly be divided into three areas: strength training, flexibility, and aerobic activity. Aerobic (or “cardio”) training is the one that gets your heart pumping by walking, running, riding a bike, swimming, cross-country skiing, etc. If you are pressed for time and can’t fit all of these in make aerobic your priority and reap its many benefits.

Focus on Investing: Nvidia (ticker symbol NVDA)

Nvidia is one of the leaders in manufacturing computer microchips at a time when the world is suffering from a microchip shortage. They supply chips for a rapidly expanding variety of products and businesses including artificial intelligence, robotics, gaming, and vehicles. Nvidia’s share price has increased tenfold (from $25 to $250) in the last five years. Potential investors should be on the lookout for an entry point.

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