Time Diversification: Tool, Fallacy or Both?

Authors

Ladd Kochman, Kennesaw State UniversityFollow
Randy Goodwin, Kennesaw State UniversityFollow

Document Type

Article

Publication Date

6-2002

Abstract

It seems fair to conclude that time diversification is more nearly a fallacy than a tool. Total periodic returns based on random annual outcomes expose the practice of diversifying with time not only as unproductive but as extremely risky as well. Yet, as the contrived distribution of alternating returns of 30% and -10% demonstrated, it is impossible to completely reject the idea that risk can actually decrease over time.