Thursday, March 12, 2009

The Madoff Mess

Bernard Madoff is headed to court today. He just expected to plead guilty to what amounts to a giant ponzi scheme.* You can't miss him on the news and every newscast talks about the people that lost their life savings.

I think what Mr. Madoff did is horrible. I hope our judicial system punishes him adequately. But isn't the first rule of investing diversification? Aren't we all supposed to be building a balanced portfolio with a mix of asset tpes?

It is horrible that people were swindled. But anytime I see folks complaining that they lost their whole life savings I can't help but thing why was your entire life savings invested with this one person/company?

* In a ponzi scheme investors are promised crazy high returns. The high returns attract more investors. The first investors are paid the crazy returns with funds from the new investors coming in.

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