Diversification Trumps Conviction with Alex Shahidi

Lead-Lag Live

Are you prepared for a financial landscape unlike anything we've seen in decades? The investing playbook that worked for the past ten years might be obsolete as we navigate unprecedented uncertainty in markets.
"It's very possible there's a sea change and the next decade looks very different from the last decade," warns Alex Shahidi of Evoke Advisors. After years of low interest rates, stable volatility, and US stock dominance, today's environment features sticky inflation, political uncertainty, and a significantly constrained policy response toolkit. The potential range of outcomes is wider than at any point in recent memory, with greater risk of extreme scenarios.
Most investors remain dangerously positioned for yesterday's market conditions. While many believe their 60/40 portfolios provide adequate diversification, Shahidi reveals that such allocations are 98% correlated with the stock market because stocks contribute disproportionately to volatility and returns. True diversification requires balancing risk contributions across multiple asset classes – what's known as risk parity.
The conversation challenges conventional wisdom about gold, revealing it has returned approximately 8% annually since 1971, just behind equities' 9%, with near-zero correlation. The 1970s and 2000s were excellent for gold but poor for stocks, while the 1980s and 1990s saw the reverse pattern. This makes gold an exceptionally valuable diversifier that remains underrepresented in most portfolios.
Perhaps most importantly, Shahidi offers a powerful framework for navigating today's uncertainty: "Diversification always trumps conviction." While it's natural to want to predict the future and position accordingly, the odds of consistent success in market timing are slim. A truly diversified portfolio removes much of the emotional pressure from investing decisions, allowing investors to follow a "slow and steady" path that historically delivers superior long-term results.
Ready to rethink your investment approach for the decade ahead? Listen now to discover how true diversification might be your best protection against whatever the markets throw at us next.

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Chapters

1. The Coming Sea Change in Markets (00:00:00)

2. Understanding Today's Market Uncertainty (00:02:19)

3. Cash as a Position: Limitations of Timing (00:08:26)

4. Gold's Surprising Long-term Performance (00:13:01)

5. The Risk Parity Approach Explained (00:21:47)

6. How to Handle Market Emotions (00:31:19)

7. Buy the Dip vs. True Diversification (00:43:33)

8. Closing Thoughts and Resources (00:50:31)