Building a Diversified Portfolio
On: 19th January, 2016 // By: admin
Managing a Diversified Portfolio is About the Right Mix, at the Right Time
You might know someone that, when the recession hit, was about to retire only to be forced to pull back and work for a few more years. While many people had protected their overall investment portfolio by diversifying, others were hit hard if they had a lopsided mix of investments. The key to avoiding a major impact on your retirement investments in any economic downturn is building a diversified portfolio.
Managing a diversified portfolio boils down to the right mix of investments for your age. If you are in your 20s, just getting started in a career, your portfolio should look different than someone entering their 50s. Here are a few tips for diversifying your investments:
Mix things up, even within each category of investment. You’ve heard that you need a mix of stocks, bonds and cash investments as you save for retirement, in order to protect your savings from a negative event. It’s also important to diversify within each class of investments.
When diversifying your bonds, you could invest in government bonds, corporate bonds, and bonds both within and outside the United States, as well as bonds with different ratings and maturities. Overall, you will look for bonds with a lower rating or length of time until maturity to get the best returns.
Get a mix in your stocks, too. You could choose both domestic and foreign companies, as well as a combination of smaller companies with a lot of growth potential mixed with larger, more established companies.
If you invest in mutual funds, learn about them. Some investors choose to invest in a mutual fund, because for a small amount of money paid in each month, you can get the benefit of a diversified portfolio. Some mutual funds allow you to pay in as little as $50 each month. It would take thousands of dollars to achieve similar diversification in the market on your own.
However, don’t just throw your investment dollars at random mutual funds and sit back to wait for retirement. Find out about your mutual funds, because if you are invested in several different funds that are all managed similarly, you may not be as diversified as you think.
Hire a professional. The mix of your diversified portfolio depends on your age. For much of your retirement planning years, you will be focused on growing your investments. However, there will come a point where protection is a priority over growth, in order to avoid scenarios where you are on the brink of retirement and are forced to hold off for a few more years.
It’s critical that you talk with a wealth advisor to determine whether your investments are the right mix for your age. A wealth advisor can help you take into account various factors that can impact your portfolio.
Contact Aura Wealth Advisors to start a conversation about your retirement plans. We can help you build a diversified portfolio, as well as discussing your hopes and dreams for your retirement years.