Diversifying Investments Beyond the Mattress
00:00:00.000 | if you only said I'm going to hide some amount of my money under my mattress and I'm going to put
00:00:05.360 | the rest in equities, the amount I'm going to put in equities, I'm going to determine by my risk
00:00:09.920 | tolerance and capacity, right? And let's say, okay, that means 50% of my money is in equities
00:00:14.560 | and I'm going to put 50% under my mattress. Then the question is, well, what else can you do with
00:00:19.760 | it? And what you find is like, if you assign some amount of diversification and actually negative
00:00:26.240 | correlation to the bonds, that means you may actually be able to put 55 or 60% of your
00:00:30.880 | portfolio in equities and the rest in bonds. Because if equity moved down and bonds move up,
00:00:37.040 | then your total portfolio drop is going to be lower than if you just had 50% in equities and
00:00:42.560 | the rest under your mattress. And instead of putting it on the mattress, you could have it
00:00:45.360 | in cash or in treasury bills, for example.