Diversification: Learn to Hate Part of Your Portfolio

Cullen emphasizes that good diversification means some holdings will underperform at times, which is expected.

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Episode notes

My guest today is Cullen Roche, Chief Investment Officer at Orcam Financial Group and Discipline Funds. His latest book is Your Perfect Portfolio: The ultimate guide to using the world’s most powerful investing strategies.

In today’s episode, Cullen walks through the principles of portfolio construction. He emphasizes the importance of viewing investments as a means of savings rather than a quick path to wealth. Cullen explores the significance of time horizons in investment decisions, why real returns are what matter, and the origins of the 60/40 portfolio.

(0:00) Starts

(1:38) Principles of portfolio construction

(6:12) Real vs nominal returns

(11:01) Asset allocation and time horizon considerations

(26:59) Evaluating the role of government bonds in portfolios

(30:21) Origins of the 60/40 portfolio

(37:44) The forward cap portfolio

(46:49) The concept of duration in investing

(56:23) Disciplined Funds

(1:02:39) Asset liability matching

(1:03:15) Factors influencing investor behavior

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