Is your portfolio diversified? Should it be? What does true diversification look like? We’ll tell you on this episode.
Click the timestamps below to jump ahead in the episode…
Other Retirement Facts:
Diversification is a popular buzzword in financial planning. But is it a strategy that everyone should implement? Is diversification a great idea or something for suckers?
What’s the purpose of diversification and why talk about it? It all comes down to managing risk. Take diversification beyond having a large number of different investment funds. Believe it or not, the more funds you have isn’t always better. You might discover that a lot of your funds will have similar asset classes, making you not that diversified after all.
As you near retirement, what kind of volatility can you handle? Is it possible to be too diversified? What is the benefit in picking the right companies for your investments? Have you had a conversation with your advisor about the kind of diversification that you need?
A lot of times, this comes down to a conversation about risk management. Are you paying more attention to diversification or to risk management? Which will work better for your financial plan? Does your financial advisor hold the same investment philosophy as you do? If your advisor is only talking about your investments instead of an overall plan and financial goals, you may need to find a different financial advisor who can work with you for years to come.
Looking past your investments, what kind of diversification do you have from a tax perspective? Understand first where you are at and then how and where you can improve. Is there a better diversification strategy for you and your plan?
Listen to the entire episode to learn more about diversification or skip ahead to a particular segment with the timestamps below.
2:00 – Is diversification for suckers?
2:50 – How does the average person define diversification?
5:14 – How does Phil describe diversification?
8:06 – How much should your portfolio be diversified?
9:13 – Can you be too diversified?
11:56 – What does a conversation about diversification look like?
Thanks for listening! We’ll be back with another episode next week.
A Quotable Moment:
“Target date funds are probably one of the more dangerous vehicles to have in a portfolio because they are misunderstood. Nothing wrong with them, it’s just that people don’t truly understand what they are.“