06/15/2010 09:45 am ET | Updated May 25, 2011

Diversification Is for Old People

Millions of articles are written about investment strategies. One that almost all commentators speak to is diversification -- the idea that since you cannot predict the return on investment from any one asset category, you should hedge your bets by spreading your investments. And, you need to revisit these allocations as you age or as your situation changes. As an example, all strategists suggest that people move out of equities and into bonds as they move toward retirement -- trading risk for predictability of return.

One strategy, however, that none of the commentators speak to is human investment -- how much of your income, assets, energy and focus should go into YOU -- your human capital. Here is my thinking on this subject:

Buying what I call third-party assets -- equities, bonds, CD's, real estate -- should not begin until you are at least thirty years of age. Prior to that every dollar you have should go into making YOU as productive and valuable as possible. That may mean education. It may mean taking a job with little present return but lots of upside. It may mean entrepreneuring -- starting your own venture. It does not mean depending on someone else or outside forces to increase your net worth, i.e. third-party assets.

Forget diversification. In the first 10 or 12 years of your adulthood, put all you have into YOU. Make yourself as valuable a commodity as possible and the other assets will follow. Diversification is for people who already have a career, who are already outearning their expenses, who need to protect against the future. Anyone under 30 has a much bigger concern -- building his or her human capital to its maximum level. And that means 100% of his/her energy, capital and focus should be investment in just ONE asset category.

Jim Randel is the Founder of The Skinny On™ book series. See