What Happens When We Forget To Diversify

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· Maintain a cash reserve. Right now, cash is king and frankly always has been. How much cash you should have depends on your individual situation. For instance, if you're a highly compensated individual and you think you might lose your job, you might err on the side of having six months or more of living expenses because it's probable that, in this job market, it will take some time to replace that high salary.

· Make sure you have enough insurance. Insurance hedges your bet against an expense you can't possibly save for in the short term, such as a disability. This is probably a good time to point out that it is Life Insurance Awareness Month. I would suggest you visit http://www.lifehappens.org to see whether you have the right insurance or enough insurance. For a good, independent source of information on life insurance, go to http://www.insureuonline.org, a Web site created by the National Association of Insurance Commissioners.

· Buy appreciating assets. You want assets such as property that have the potential to grow over time.

· Diversify your assets. What you don't want to do is put all your money in one particular investment. For example, investors are now going for gold, and buying high, I might add. Gold for December delivery jumped more than $100 over two days last week, to settle at $897 per ounce Thursday. Silver was up more than $2 over the same period, to settle at $12.70 Thursday. While gold can be a good addition to your portfolio, you shouldn't be overexposed in this asset class.

You can find some basic information about asset allocation at the Securities and Exchange Commission's Web site at http://www.sec.gov/investor/pubs/assetallocation.htm. I've also found a particularly helpful asset allocation tutorial at http://www.investopedia.com. Search for "A Guide To Portfolio Construction."

· Don't borrow to invest. But if you do, either have the cash to cover that bet if the investment tanks, or have enough money in reserve to make the loan payments until you can sell the asset or, in the case of a home, rent it.

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