FINANCIALLY
Speaking
Is Your Investment Plate Well Balanced ?
Jeffrey M . Orth is a Chartered Financial Consultant , a Certified Advisor in Senior Living , and an Investment Advisor Representative , with over 15 years experience as a business and personal planning , insurance , and wealth management specialist Jeff is available for group lectures and private consultations . Visit ifitfinancial . com or call 408.842.2716 .
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We all know that if we eat a wellbalanced diet and exercise regularly we greatly increase our chances for a longer and healthier life . It ’ s the same for our long term financial health .
Diversification matters . Yet it ’ s an unfortunate reality that many investors don ’ t know how to properly diversify their portfolio . And some people have lost faith in the effectiveness of diversification since the “ perfect storm ” market crash in 2008 .
Diversification is a long term strategy intended to help reduce risk and help minimize losses . This strategy is designed to benefit investors when the market is up and to lose less ground when the market is down . This is accomplished by spreading dollars among different types of assets like equities , bonds , cash equivalents , domestic securities , international securities , alternatives , real estate , and so on . It ’ s about having a complement of investments that are not highly correlated with each other , that is to say don ’ t commonly ALL go up and down at the same time . Think of it as having a dinner plate with meat , potatoes , and a vegetable , rather than one that has mashed potatoes , French fries and a baked potato .
Some important points to consider :
DIVERSIFICATION CAN REDUCE RISK The types of investments are more important than the number of investments .
INVESTORS SHOULD LOOK BEYOND SHORT TERM FLUCTUATIONS Volatility is like a rollercoaster . You want to be on a coaster with your risk tolerance in mind , one that is designed with a specific goal in mind .
TIME IS MORE IMPORTANT THAN TIMING Tactical changes inside a well balanced portfolio can help improve long term performance . Timing the market is often a fool ’ s errand . Statistically , market timers generally have worse portfolio performance than those who buy and hold a well-diversified portfolio .
INVESTORS CAN MAKE MONEY IN FLAT MARKETS Generally speaking , portions of a well balanced portfolio will potentially show growth , even when other parts do not .
DIVIDENDS CAN MAKE A DIFFERENCE Investing in companies with a history of paying dividends , and then reinvesting those dividends , can help stabilize a portfolio when markets are down . Reinvested dividends add more shares and also provide an opportunity for portfolio growth .
REAL IS MORE IMPORTANT THAN PERCEIVED DIVERSIFICATION What diversification is not about is the number of funds in a portfolio ! It is possible to have a large number of investments that are highly concentrated in a single sector . True diversification is about the types and quality of investments held in the portfolio . For example , proper diversification would have helped an investor avoid a portfolio solely invested in the then-popular “ tech stocks ”, just before the market decline of 2000 . A lot of people got hurt badly in that recession because of some highly unrealistic expectations of the technology area , and a lack of attention to fundamental investment principles .
It is clear to me that few investors really understand how to truly diversify the investments in their portfolios , and many are looking for help . Take a look at your investment ‘ plate ’. Do you have too many ‘ potatoes ’ on it ? You can build a stronger , better balanced and more ‘ weatherproof ’ portfolio with a little help from a professional who has the tools and experience to help you reach your goals .
Diversification does not guarantee a profit nor eliminate the risk of loss . The author ’ s opinions , comments information , etc . are those solely of the speaker and are independent of , and do not represent , HTK , and should not be considered as specific investment or planning advice . Please consider your options based on your individual circumstances . GMHToday and other listed entities are independent of and un-affiliated with , HTK and Integrated Financial Benefits Network ( IFit ).
Registered Representative of , and Securities and Investment Advisory Services offered through Hornor , Townsend & Kent , Inc . ( HTK ). Registered Investment Advisor . Member FINRA / SIPC , 16845 Von Karman Ave , Ste . 225 Irvine , CA 92606 ( 949 ) 754- 1700 . I Fit is independent of HTK . CA Lic # 0C49291 ( Not an offer or solicitation in any state where representative is not properly licensed or registered .) Loans and other policy withdrawals will reduce the death benefit amount and may be subject to surrender charges and income taxes . All guarantees are based upon the claim-paying ability of the insurer .
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GILROY • MORGAN HILL • SAN MARTIN SEPTEMBER / OCTOBER 2015 gmhtoday . com