Most say that diversification is important, both within asset classes and across asset classes. I have been playing around with this http://ift.tt/1M7BWRs using different vanguard indexes.
I found the following correlations Total US stock to Total international stock .9, Total US stock to emerging market stock. .71 and total US stock to US REITs .79. I know, that like past performance is not indicative of future results, Past correlations are not indicative of future correlation.
This paper http://ift.tt/2n5wFYv makes the argument that going equity markets are going to have higher correlations going forward due to a more connected world economy.
So now I am thinking I may be wasting my time trying to diversify within assets classes and that I should just buy the total US market for the equity section of my portfolio. I have also considered buying REITs as a means of diversification but going back to the REIT correlation I found (.79)I am not sure I can call REITs a separate asset class when they are so highly correlated to the US stock market. I still see the value in diversification across asset classes. However I am not sure at what correlation you should actually consider something a different asset class. Or if I am wasting my time trying to diversify within asset classes. Thoughts?
Submitted November 11, 2017 at 02:19PM by questions77777 http://ift.tt/2ytiSxf
