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George Washington and Portfolio Diversification

By Carl Delfeld

NEW YORK ( TheStreet) -- When I lived in Washington D.C., one of my favorite places to visit was George Washington's Mount Vernon estate.

Washington was an avid student of the neoclassical architectural style and you can see his salute to balance and symmetry everywhere at Mount Vernon. For starters, 32 equidistant poles surround the ellipse in the front courtyard, with a sundial placed at its exact center.

The uniformity continues inside the mansion. Even as the British were closing in, the general issued these instructions to his manager, written in 1776 from Harlem Heights: "The chimney of the new room should be exactly in the middle of it -- the doors and everything else to be exactly answerable and uniform -- in short, executed in a masterly manner."

If only our approach to money management was so clear and precise.

But it turns out we can learn a thing or two from George Washington when it comes to investing and portfolio diversification.

Apply the "Washington Balance" to Your Global Portfolio: In today's highly uncertain and volatile climate, do you have a balanced investment approach that marries capital preservation with growth?

For starters, consider one of the portfolios that I use as a building block for my private clients. As you can see, it's divided equally into two main sections.

1. "Safer" Investments: This includes 20% in long Treasuries, represented by the iShares Barclays 20+ Year Treasury Bonds (TLT); gold and silver, with 5% allocated to the SPDR Gold Shares (GLD); and iShares Silver Trust (SLV); the Swiss franc, represented by its CurrencyShares Swiss Franc Trust ETF (FXF); plus 15% in cash investments.

2. "Aggressive" Growth-Based Investments: The other 50% of the model portfolio is divided among strong equity positions and emerging markets. This includes 10% in the iShares S&P Global 100 Index (IOO), an ETF that tracks the performance of 100 large-cap multinational firms; and 5% in the PowerShares International Dividend Achievers (PID), which seeks to replicate the performance of U.S. and foreign stocks that have consistently raised their dividend payments to shareholders over the past five years.

The remainder is divvied up into more speculative emerging market equity positions -- the broader WisdomTree Emerging Markets Small Cap Dividend Fund (DGS) -- and a more aggressive tilt toward specific markets like China, Germany and Singapore.

OK, so now that you've got a balanced portfolio, what else can you learn from George Washington?

Pick Your Battles but Seize the Day: By nature, Washington had an aggressive personality. But he learned to temper it in the face of a formidable foe (the Brits), knowing that he possessed meager resources and an army that could be wiped out in the blink of an eye.
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TLT $122.83 1.35%
IOO $75.56 0.47%
SLV $13.51 0.52%
GLD $102.28 0.35%
PID $14.94 0.47%


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