By Courtland Adams
Most of us don’t like change. There’s no denying that change can be difficult—even with the small stuff. We stick to our routines, our favorite takeout spot, a certain hairstyle. If we go a different route, what if we don’t like the result?
We often think about our finances in the same way. Our funds are doing okay, but in reality, we would like to know our funds will grow beyond just “okay.”
If you’re looking to change your financial future for the better, it’s time to look at diversification. Diversifying your portfolio can help decrease risk while also reaching your future goals with confidence.
One primary role of diversification is to minimize risk. This doesn’t just mean diversifying between growth stocks and value stocks. True diversification requires incorporating a mix of different types of investments—think stocks, bonds, international investments, real estate, etc.
There are varying factors that govern the amount of risk you’re willing to accept. If you are banking on your money being there for you on a certain date, it may align better with your financial plan to utilize a more conservative mix of investment assets with a history of lower volatility. Having a portfolio that is diversified with lower risk will give you peace of mind.
As we mix and match asset classes and strategies, risk-capacity decisions need to be made no matter the timeline length. By optimizing the way your portfolio is constructed, we can help minimize risk and maximize returns.
Since its inception in 1926, the average return from the S&P 500 has been 10-11%. Learning a bit of stock market history often puts many at ease when deciding to move money from a savings account into the stock market.
Downturns and recessions are certain realities during one’s lifetime, but those are the same reasons why many wealth managers suggest taking a long-term view on investing. Simply keeping your money in the stock market versus quickly buying and selling is a risk-mitigation strategy of its own.
These downturns also pose new opportunities. Take the global pandemic, for example: 2020 created a unique window of opportunity. Certain high-growth investments performed exceptionally well as the economy reacted to COVID-19, while the brief drop in the market made some value investments available at deeply discounted prices. 2020 provides an example of how investments respond differently to economy-wide shifts, which underscores the importance of diversification as a hedge against both short and long-term losses.
Because of the unpredictability associated with short-term stock market success, diversification and investing according to when you need the money can help you reach your goal with more confidence when compared to putting all your eggs into one basket.
Perfection is notoriously unattainable, so calling an investment mix “ideal” can feel like a loaded term. Everyone has their own unique goals, dreams, timelines, and risk capacity—what’s ideal for one may not be ideal for another. In general, the closer you are to retirement, the more conservative investment mix you might hold. Remember that portfolios can change with time; that’s the beauty of the stock market—you can change your portfolio as your goals evolve.
Change doesn’t have to be a bad (or scary) thing. But because altering your investment decisions can have major consequences, it’s a good idea to meet with a financial advisor who can get to know you before recommending and managing your investments to best align with your unique financial goals.
We at Coign Capital Advisors do just that. We provide holistic wealth management that goes far beyond investment consulting and create customized solutions to make all your financial goals achievable—now and in the future.
If you’re looking to partner with an experienced advisor you can trust to put you first, set up a get-acquainted meeting to see if we’re a good fit. Reach out today by emailing email@example.com or calling 801-676-4570.
Coign Capital Advisors is a fee-based investment advisory firm based in Draper, Utah. Specializing in serving retirees, business owners, and entrepreneurs, the firm provides holistic wealth management that goes far beyond investment consulting and strives to attain suitable performance combined with solutions that make clients’ financial goals achievable. Led by J. Matthew Zundel, ChFC®, M. Brandon Riley, CFP®, Adam G. Lefler, Daniel R. Zundel and Courtland Adams clients receive a high level of service from a team with more than 100 years of combined experience. To learn more, visit www.coigncapital.com.
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Have you ever felt like there’s more to life than just balancing spreadsheets and chasing that extra dollar?