How Many Different Assets Would Have To Go Away To Make Me Fearful About Supporting My Family?

That question, right there, is what diversification really boils down to—a lot of financial planners say things like, you need twenty stocks, or you need thirty stocks, or whatever it may be—but that kind of stuff is just shorthand meant to give a kneejerk response to a Yahoo! or MSN Money audience that they don’t want to actually have a specific, detailed conversation with.

When I think about diversification, this is what enters my mind: U.S. bonds, real estate, small-cap stocks, and large American individual stocks. There are other things you could add if you wanted to get really niche: international government bonds, midcap stocks, international stocks of all varieties, and high-yielding corporate bonds in a few select cases, but that’s based on your own particularities of what you’re trying to do.

Here’s how I’d think through each one. First you have the staple of security for all long-term planning: … Read the rest of this article!