portfolio diversification

One main factor for success, whether you’re a Grainger employee or anyone planning for retirement, is a well-planned wealth accumulation strategy that is designed with the goal to strengthen your investment portfolio. It helps to have a good mix in your investment portfolio which aims to help offset market fluctuations and correlates with your long term goals and financial needs. Portfolio diversification is all about strategy, and focusing on alternatives can be a great start.

At one time only the wealthiest were able to utilize alternative investments, but in recent years, an increasing number of alternative strategies have been packaged in ’40 Act (1940 Investment Company Act) that regulates mutual funds. Many advisors are encouraging clients to add these products to their portfolio because they broaden diversification, and give investors a risk/return profile unique from that of equities, bonds or cash. While large cap US stocks (S&P 500) over the long term have traditionally outperformed other asset classes in absolute returns, there are some alternative investments that can help lessen the correlation of a traditional portfolio to the stock market, potentially dampening the effects of market volatility.

In terms of overall risk, alternative strategies generally live somewhere between stocks and bonds. Most alternatives have a lower risk than an all-equity portfolio, and depending on the strategy, probably have a higher risk than a bond portfolio. After adjusting for the higher risk level of stocks, alternative strategies deliver a higher return. Generally speaking, as part of a long-term investment strategy, alternatives tend to perform better over time than other investment vehicles.

Many experts see alternatives as a critical asset category. What most investors don’t understand is that there is not one alternative strategy to choose from, but many. Doing your research is important. Of course, alternatives (as do other investments) involve a certain amount of risk. Finding that “sweet spot,” or the appropriate mix of investments with the goal of generating consistent returns while managing portfolio volatility is the key to generating sustainable returns.

To learn more about alternatives and what they can do for your investment portfolio, contact Mooney Lyons at 1-847-382-2600 for expert answers to all of your financial questions.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential loss.

Investing e-book

X
X