In a recent Washington Post column, Barry Ritholtz says that too many investors are still getting victimized by “muppet portfolios”.

“Muppet portfolios,” Ritholtz says, are portfolios “assembled for the sole purpose of maximizing commissions to the retail broker, period.” He talks about the way Wall Street assembles these  portfolios and pitches them to unsuspecting retail investors. “About 10 percent of the new accounts that we see are muppet portfolios,” he says. “These typically hold hundreds of positions. Mind you, these are not from a family office with $150 million, but a portfolio 1 percent of that size. There is no rational reason for these sorts of assemblages to be holding 100-plus positions.”

Ritholtz says that investors are far better off by diversifying through low-cost funds. He suggests owning what he says are the 15 broad asset classes — including different types of stocks, bonds, Treasuries, commodities, and more. “You want to own all of these because from year to year, no one ever knows which asset class is going to perform the best,” he says. “And no one can tell in advance which asset class is going to have a bad year. So you own them all, and you don’t worry about it. Much of what you own is going to be going up most of the time.” He says the great thing about diversifying is that it’s “about as close as you can get to a free lunch in investing” because of the ability to buy index funds or ETFs focusing on these broad asset classes at extremely low costs.