“It’s about diversifying yourself so much that if there is a crash or a very serious correction, you won’t be killing yourself in the middle of the night with fear and anger and self-loathing,’’ he says. Here are excerpts of a recent interview:
■ What’s your prognosis for the economy?
I think the recovery will continue. There’s some question about whether or not the end of stimulus spending will be a big problem. But since we didn’t really seem to notice much upward movement as a result of the stimulus, it’s hard to believe there will be a lot of downward movement when the stimulus is removed.
■ Do you see corporations continuing on the same upward path they’ve been on lately?
I think they can keep squeezing out profits and maybe even profit growth, but not at the same rate. The rate since the first quarter of 2009 has been unparalleled.
■ Why dare to be different?
If you have everything in the stock market and the market moves drastically against you, the temptation is to get out while you still have something left. Whereas if you have lots and lots of diversification so that any movement in the stock market does not drastically affect your net worth, you can stay in longer and then reap the benefits when the market recovers.
■ Aren’t most investors going to be afraid of these [alternative] investments?
It’s partially fear, but partially the fact investors don’t know what they are. We give a long list in our book of mutual funds that have strict SEC regulation that mimic the performance of different vehicles in the world of hedge funds. Putting money in some of these funds as diversifiers is a very good idea. If that’s too scary, Phil and I recommend just having your portfolio in [Vanguard Total Stock Market ETF], a worldwide index fund… . Just put 70 percent in that — or 60 percent if you’re a little bit older — and 30 percent in cash or short-term Treasuries.
■ What commodities should individual investors focus on?
I don’t recommend the small individual investor buy individual commodities at all. I’ve been a pessimist on gold, and I still don’t think gold deserves to be at the price it’s at. I just don’t see why it is considered so valuable… . It’s like an obsession.
Dave Carpenter writes for the Associated Press.
