Diversification is an important strategy to follow when investing in equity markets. It is especially important for retail investors who can least afford to lose hard-earned money. To be sure even professional money managers who run other people's money for a living use diversification to reduce risks. For example, many equity mutual fund managers hold 50 or even 100+ stocks in their fund portfolios to take advantage of diversification. However whether diversification can be only be achieved by holding that many stocks is beyond the scope of this article. In general, it is a wise idea to diversify one's portfolio across sectors, countries, asset classes, etc. This is especially important for long-term investors who monitor their holdings but do not trade often based on the gyrations of the market.

In order to fully gain the benefits of diversification it is important to hold a mixture of stocks and bonds of

By Robert Goldsborough

After years of underperformance, the battered United States financial sector has been off to a strong 2013, driven by continued good news from the housing industry and more gains from the stock market. But many of the same headwinds facing the sector are unchanged--starting with continued low interest rates (which will remain so for the foreseeable future) and the lower interest-rate-spread revenue that banks have accepted. Added regulation has meant another layer of costs for financial services companies, and counterparty relationships with European banks could mean losses for U.S. banks if Europe's banking system collapses.

Despite these headwinds, we see some attractive drivers that could continue giving a lift to the financial sector, even if rates remain low. Further macroeconomic improvements and lower unemployment rates should increase borrowing and repayment rates. Banks have cut costs in other places, including reducing staff and branch locations, which we believe

I feared this would happen. Peter Eavis has a column today about what his headline calls “Down Payment Rules”. Here’s his lede:

It seemed an easy fix to prevent the excesses of the housing market: make home buyers put more money down.

Read on, and you’ll find lots of talk about “down payment requirements”, “restrictions” on lenders, and whether “requiring a down payment” is a good idea or not, given that we want to both encourage homeownership and prevent systemic risk.

But the subject of Eavis’s column — something called the qualified residential mortgage, or QRM — was never designed to be “an easy fix to prevent the excesses of the housing market”. Rather, it was designed as a loophole to allow banks to wriggle out from an entirely sensible skin-in-the-game requirement.

I covered this subject in some depth back in June 2011, so go read that post