top of page
Search

ARE YOU TRULY DIVERSIFIED?



Historically diversification was simply referred to the mix between the stocks and bonds in your portfolio. Many ask the question: How do you diversify a portfolio today? In today’s market we wanted to share what we see as true diversification. We believe in having funds in not only different asset classes but also having funds in different forms of accounts period.


***SEE CHART ABOVE


BUCKET 1. FULLY LIQUID / MINIMAL RISK: Ie Emergency Fund in Cash, & in Banks

BUCKET 2. PROTECTED GROWTH / LONG TERM: Protected from market volatility risk and those accounts include Indexed or Fixed annuities, Universal Life Insurance, CD’s

BUCKET 3. LIQUID / BALANCED: Mutual funds, ETF’s Mix of stocks and bonds. * If younger than 59 1/2 these should be in a brokerage account to remain liquid.

BUCKET 4. LONG TERM / GROWTH: Growth stocks. Can also be liquid after 59 1/2. **Pre Retirement if these are in 401K, IRA, 403B etc they will not be liquid.


Here are our top 4 reasons for this approach when looking to diversify a portfolio.


  1. By having some funds in Bucket 1 & 2 you avoid full market volatility risk

  2. You’ll have a well diversified tax exposure allowing for better planning on saving big on taxes.

  3. When having protection on a portion of your funds from Bucket 1 & 2 you can still be aggressive in Bucket 3 or 4 without risk of loosing it all. (You’ll sleep better at night)

  4. Allows you to navigate different economic trends while providing exposure to market growth in different sectors.


Last year showed us again with time that having funds in bonds are not necessarily safer than stocks as they plummeted as well. Excluding Real Estate investments, we believe it’s time to think of diversification more broadly by truly having funds in different types of accounts and with some that are protected from the market.


Disclaimer: The information on this post does not constitute personal financial advice. You should contact your financial professional to review the financial options that best suits you.


9 views0 comments

Comments


bottom of page