Imagine solely depending on nest eggs for survival. What would happen if all of your eggs, stored in a single basket were suddenly crushed? Failing to diversify your investments is the same risk you run as keeping all of your eggs in a single basket.
The best investment portfolios are diversified through myriad asset types such as stocks, ETFs, mutual funds, bonds, CDs, money market accounts and even real estate.
This may sound intimidating, so understand you are not alone. Don’t be afraid to ask for help.
Investment diversification is inherently challenging simply because there are so many stocks and investment vehicles to choose from. This is where the assistance of a financial advisor proves vitally important. Your financial advisor will help you diversify your investment holdings across several different industries, risk levels and types of investments so you are not completely dependent or overly-dependent on a specific stock or industry.
An Inside Look at a Well-diversified Portfolio
A truly diversified investment portfolio includes a multitude of asset classes. The best portfolios feature both growth-oriented stocks and comparably conservative stocks. Growth-oriented assets typically generate an investment return across posterity while posing considerably more risk than defensive assets. More conservative, value-oriented assets don’t have the same boom or bust potential, often generating a comparably lower return across the long haul than more risky investments.
Ideally, your financial advisor will help you build a diverse asset portfolio consisting of stocks, mutual funds and ETFs in companies both large and small that span numerous industries in countries across the globe.
Investment Diversification is an Ongoing Effort
Having a savvy financial advisor in your corner is necessary for reviewing your investments to ensure they have not significantly changed. The risk level of your portfolio should be analyzed at least once per year to help guarantee it does not pose excessive risk or is too conservative. An effective financial advisor will rebalance your portfolio to create a well-diversified mix of stocks, ETFs, mutual funds and other investment channels that span several economic sectors.
Furthermore, there is the potential for your goals to change over time. If you are getting closer to retirement, your investment portfolio should reflect your proximity to this metaphorical finish line emphasizing certain sectors and asset classes that are low-risk. Alternatively, if you are promoted at work or receive an influx of cash through an inheritance, you can afford to take more chances with your portfolio. Lean on your financial advisor to alter your portfolio’s investments accordingly and feel confident knowing your investments are diversified with your unique goals and financial situation in mind.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of [INSERT NAME] and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one’s entire investment. There are special risks associated with investing with bonds such as interest rate risk, market risk, call risk, prepayment risk, credit risk, reinvestment risk, and unique tax consequences. To learn more about these risks and the suitability of these bonds for you, please contact our office. ETF shareholders should be aware that the general level of stock or bond prices may decline, thus affecting the value of an exchange-traded fund. Although exchange-traded funds are designed to provide investment results that generally correspond to the price and yield performance of their respective underlying indexes, the funds may not be able to exactly replicate the performance of the indexes because of fund expenses and other factors.