You’ve probably heard the phrase: “Don’t put all of your eggs in one basket” and maybe you wonder what that concept really means for your finances. Diversification is splitting your investments into different “baskets” in order to reduce the risk of losing all your “eggs” or money, if one basket falls or performs poorly. An asset allocation strategy is a key element to developing an investment plan. The asset allocation represents decisions about what percentages of a portfolio to allocate to various categories such as stocks, bonds, and cash. Whether you are a more aggressive or conservative investor, all well balance portfolios will hold an appropriate amount of stocks and bonds in mutual funds. A diverse portfolio includes multiple investments to reduce the adverse effects of a quick downturn in the market and to participate in the reward of an upside market movement.
A practical example of a diversified portfolio may have 60% in stocks and 40% in bonds,
or 70% in stocks and 30% in bonds.
Do you hold a large amount of a stock that was given as a gift to you from a family member? Do you know how diversified your portfolio is? Do you know what percentage of equity and fixed income you currently hold?
At Schenley we create an overall strategy and pick specific investments which would have the right balance for your goals. We would be happy to review your investments and see if your asset allocation is diversified in a way that meets your needs.
Written by: ||lauren pearce, associate||