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October 10, 2010 at 11:35 AM
A solidly middle-class acquaintance once recounted how a century ago his family were large landowners in a then “undervalued” city. In the midst of an economic crisis, the family was forced to sell all their land for a pittance and emigrate. Naturally, that land, now located in the heart of an expensive, fashionable city, would be worth gazillions. This is precisely why the wise King Solomon counseled investors to “distribute portions to seven, or even to eight — for you never know what calamity will strike the land.”
Investment advisors do not usually hold much sway over clients’ employment or property ownership, but it is in the realm of liquid investments where you have the greatest influence and are most able to help clients both increase and protect wealth. In theory, you should effectively diversify to avoid the need to sell client investments at a loss; in practice, however, a crash like we saw in 2008 posed the rare challenge of having no place to hide, forcing many investors in need of liquidity to sell at a loss.
In search of Solomonic investing wisdom in today’s world, I turned to Southern California investment advisor Less Antman. Among the top echelon of talented advisors and brilliant researchers, Antman is unique in bridging both worlds, managing assets in the real world while consuming academic research and performing his own studies. True to form, Antman has a solution that should be of profound interest to all financial advisors.
A True Diversifier
“I always tell clients volatility is the price which must be paid for long-term growth: Buffett’s Berkshire Hathaway has lost 50% of its value three separate times. But I still try to diversify portfolios as much as possible without sacrificing returns, and a relatively unknown alternative investment is one of my favorites.”
Specifically, Antman recommends a commodity trends fund. Note that I am not talking about the commodities futures funds which became very popular in the past decade as other asset categories became ever more closely correlated. Alas, they offered no protection in the latest bear market; while a portfolio divided equally between U.S. and international stocks lost nearly 60%, adding a third equal commodity leg only cut that loss to around 55%.
