Had to jump back in on this,
Definition of diversification:
"A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction. The goal of diversification is to reduce the risk in a portfolio. Volatility is limited by the fact that not all asset classes or industries or individual companies move up and down in value at the same time or at the same rate. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions"
I keep reading these posts that it is presumed that adding an international fund or any other non-correlated investment will spice up your portfolio and net you a better return. It would if its expected return was higher to begin with. But to just add it because you don't have a presence in it (basically just to hedge your bets) seems like faulty thinking.
Note that last sentence "diversification reduces both the upside and downside". As i wrote in in a previous post, you can't spread out your investments and have a combined expected value greater than if you only held the 1 investment with the highest expected value. Mathmatically impossible. No synergy in math. Sure the future result may be more than the expected result, but NO ONE can guarentee that. If you want to argue that the S&P is not the highest expected value investment in the next 18 years, then you CAN argue that. Or if the future looks brighter for real estate than stocks, then that gets thats an argument that has can be discussed.
If you want to add more investments that are non-correlated to smooth out your returns, then why not just stick to a long-term investing horizon (18 years most likely). By doing this you will not have to dilute your expected investment return.
Also if you keep re-adjusting your portfolio, isn't that just really market timing?