Doing Asset Allocation in right way is the Key for Diversification.
When two sides clash and nobody inturrepts them, a definite winner emerges quickly.
In fact, however, there are always interference between the two parties by third.
There were two dominant sides of World War 2 during the unfortunate time last century: the Allies and the Axis.
The United States, the United Kingdom, Russia, and a few other nations made up the Allied Forces.
Germany, Italy, and Japan became the major Axis forces.
The Axis forces were retreating by the end of World War 2, as the Allies pressed forward against them.
The Axis couldn’t stand a chance against the Allies.
The Allies had access to armaments that the Axis couldn’t match thanks to US support.
The Allies had an Air Force that could drop bombs deep into Axis territories.
Bombs released from the air have the potential to do a lot of harm. However, they are never enough to actually beat the other side.
For a war to actually have a winner and loser, one side must dominate the territory.
There’s an unwritten rule in defence circles: you can only control land by tanks.
None that would suffice. There are just tanks.
The Tiger tank was a mighty tank on the Axis side. The Churchill tank was created as a response by the Allies.
Without going into so much depth, it was truly monstrous.
The Axis powers pulled off a clever trick here.
They were unable to defeat the Churchill tank. What if the Churchill tank never made it to them?
Many minor rivers and streams pass through Europe’s terrain.
Almost all of the bridges that crossed them were demolished.
The Churchill tank was 36 tonnes in weight (your average hatchback car weighs 1 ton, to give some context).
What is the ideal way for a tank to cross a river?
It doesn’t. A bridge is needed.
It didn’t matter whether the Churchill tank existed or not if there was no bridge.
What other options do you have?
Soldiers will cross rivers and streams in boats or small vehicles such as Jeeps.
Unfortunately, those soldiers in Jeeps will come face to face with a tank as they crossed the canal. What’s more, it’s a tank called the Tiger tank.
There’s no way.
The only way forward was to build a bridge.
How long do you think it’ll take?
At the very least, a few months? Is it only a year?
No army has time to construct a conventional bridge.
As a result, they devised an unusual bridge.
This is a Bailey bridge.
A Bailey bridge looks a lot like a Lego toy. Its main component is a rectangular structure with two 45-degree squares within.
Pins may be used to join these parts together.
Each of these was just about 250 kilogrammes in weight. This meant that it could be lifted by about 6 people without the use of cranes.
It also meant that it could be transported to far-flung areas in small vehicles.
A Baliey bridge can be constructed in a matter of hours by a group of soldiers without the use of cranes.
Most soldiers use it today all around the world.
These bridges, by the way, are very sturdy.
They would be able to transport the Churchill tank.
Without getting into detail about the horrors of war, the Bailey bridge enabled the Allies to use their tanks.
Except for one thing: the bridge, the Allied had done everything right. When they found the missing connection, they were able to put everything else they had done right to good use.
You can do anything correctly, but it won’t matter if main components are missing.
This, like all other life teachings, applies well to the world of investing as well.
You may have picked the right mutual funds to invest in, but you don’t have an emergency fund.
You could have selected all-star stocks but without purchasing medical insurance.
There could be a faulty link in the chain that effectively negates anything you’ve done correctly.
Find it and build a Bailey bridge over it!