In the world of finance, the only free lunch is diversification - so they say. Well, so says famous economist and Nobel Prize winner, Harry Markowitz. The concept that by mixing a number of different investments will, on average, and over the long-term, yield higher returns while reducing the risk. In other words, don't put all your eggs in one basket. The strategy has been used for as long as investing has been around, it's as old as the hills.

The project looks like the set of a horror film. Half-finished apartments blocks stand empty and abandoned. Following the credit crisis of 2008, China was booming. And everyone wanted a part of it. Fast forward 10 years, and we're now witnessing what happens when you drive really fast down a windy road.

I randomly dish out investment lessons to my 7 year old. Yesterday I was explaining the concept of revenue and costs. I started off with a simple one. I asked him, if you made $1,000 in revenue and you spent $400 in costs, how much profit do you have left? $600 he responded. I went on, if you made $1,000 in revenue and you spent $5,000 costs, how much profit do you have left? He looked at me. Puzzled. His eyebrows pinched inward. And he burst out laughing. You have no money he responded. Clearly he has not heard of Uber, Tesla (until recently), Snap, AirBnB, Slack, and so on. His response was totally logical. And it is the same response many investors today give.

What did the number 0 say to the number 8? Nice belt. Ha! Lock down life and kids jokes. But it did get me thinking. With cash rates at near zero, bond yields at record lows, investors continue to be pushed into directions they may not have gone before. It also creates bubbles in all sorts of places - unintended consequences.

I remember bringing in my parents' mail, opening the holding statements. My parents bought into the Telstra float. I have absolutely no idea how my parents ended up with these. They have been an absolute basket case IMHO. "They pay a good dividend" - at what cost? My capital, no thanks.

Just as you thought the stock market couldn't possibly throw any more surprises at you, the S&P 500 (US stock market) literally just notched up a 100% return from it's March 2020 low. In fact, the doubling of the S&P 500 just took 353 days, the fastest the market had doubled since World War II. A couple of other fun facts: