An alternative approach to diversification, which is quite different from conventional investment wisdom, is explained in Mike Dever's book, "Jackass Investing: Don't do it. Profit from it.", (which is the Amazon Kindle #1 best-seller in the mutual fund category).
One concept that is very interesting in "Jackass Investing" is that the author replaces asset classes with "return drivers" and "trading strategies". As explained in the book, asset classes are simply long-only trading strategies that do not attempt to isolate their many separate return drivers. To be properly diversified, a portfolio must distribute risk across numerous "return drivers".
When people limit their investment options to buying (i.e. long only) conventional asset classes, including tangible assets as described in the article, they are unable to create a truly diversified portfolio. By diversifying outside this constraint, they are able to achieve a "Free Lunch," which is a portfolio that earns greater returns with less risk than a conventionally-diversified portfolio.
Once viewed in this fashion it is easy to create a truly diversified portfolio, rather than one constrained by the shackles of asset classes. Diversification is the one true "Free Lunch" of investing, but it must be true portfolio diversification, as described in "Jackass Investing". It's amazing how logical this approach is yet so few people actually embrace it.
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johnignite of PA 11:06AM April 04, 2012