Asset diversification is an investment strategy that is designed to help investors minimize their exposure to market volatility while attempting to maximize their opportunities for high returns over the long term. While diversifying assets does not guarantee any investment objective will be met, spreading out investable dollars over a diverse mix of stocks, bonds, cash and other assets could better prepare investors to react to and ride out the high and lows of market swings without suffering permanent loss of capital.
Historically, no single asset class consistently outperforms another, and, few have yielded consistently strong returns year-over-year. In addition, without the benefit of a crystal ball to see into the future and the power to control all of the factors that can influence investment performance, investors may not want to risk putting all of their eggs into one basket. Instead, it is important to consider the risks and rewards of each investment against one’s own personal level of risk tolerance and time horizon, which may be reflected by their age and their unique short-and long-term financial goals.
To get started diversifying your portfolio, consider meeting with professional financial advisors who can help you identify how much risk you are willing and able to take based upon your budget, time horizon and retirement goals. For example, an investor in his early 30s may not have substantial savings to invest. However, because his plan to retire is decades away, he may be able to tolerate more market volatility and risk more potential losses than another investor in his early 60s who is planning to retire within the next few years. Therefore, the thirty-something’s 401(k) retirement plan portfolio may be more heavily invested in high risk-high reward stocks, whereas the sixty-something may have more of his money invested in the relative safety of bonds and even cash.
A basic rule of investing is that the effects of volatility can be diminished the longer an individual holds an investment. With this in mind, it is important that investors combine asset diversification with a long-term investment strategy that they can stick to and ride out market upswings and downturns. While asset allocation can be adjusted in the short-term to react to market volatility to an investor’s immediate needs, staying invested over the long-term could translate to more consistent growth.
About the Author: Olga Ismail is a retirement plan consultant in the Ft. Lauderdale, Fla., office of Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. For more information, call (954) 712-8888 or email email@example.com.
Provenance Wealth Advisors (PWA), 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.
Olga Ismail is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC. Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.
material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. The information contained in this report has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.
Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Diversification and asset allocation do not ensure a profit or protect against a loss. Future investment performance cannot be guaranteed.
Updated March 1, 2023