Wasting Asset

finance- a la shmoop. what is asset allocation? alright well we have one

basket, and we have all of our eggs and we have enemy boulders ditches and speed [girl holds basket]

bumps in our way. they're all out to get

us. and everything's fine as we walk along

the path of life until one day, yeah oops carnage. well how do you avoid whoops in

the land of finance? well there are a couple of key things to keep in mind and

in baskets. first investments in an of an asset class like oil or transportation

or commodities like cotton or technology like software, very roughly tend to all

move together like Canadian Geese in the spring. that is the price of oil

controlled by Royal Dutch Shell, correlates almost exactly with the price

of oil controlled by British Petroleum or BP. there are two different stocks but

they generally move in lockstep so if you invested in one company odds are [man sits on mossy bench]

good that its performance will have been very similar to that of all of its

competitors in the same oil producing space. oil is an asset and the notion of

intelligent asset allocation is that you want to diversify away risk in your

portfolio by diversifying the asset classes in which you put your dough. so

if you wanted to be broadly exposed to the S&P 500 with its dozen or two asset

classes, well you'd want to pepper your eggs in some semi even distribution may be across baskets in telecommunications real estate utilities retail insurance

banking and so on. such that when those potholes come along and you trip in one [eggs put in a line of baskets]

and you most certainly will and the basket ends up looking more like paper

when you stand up because you smushed it. well then you still have eggs to cook

from other baskets you put your money in. if that still doesn't work well maybe go

vegan. [girl stands in kitchen with empty basket and fruits on the counter]