Soaring Stocks Raises Importance Of Diversifying
The concept of diversification is vital to investors: Don't put all your eggs in one basket so they won't all get smashed if you trip and fall. It's better to spread your wealth over a broad financial spectrum of investments, but avoiding pitfalls isn't as intuitive as it may seem. Diversification neither assures a profit nor guarantees against loss in a declining market. This is especially important to remember when stocks are soaring and portfolios can get overloaded with stocks and human nature is to get greedy and overly optimistic about a continuation of the current trend.
Retirement investors sometimes think broadening asset allocation is as easy as plunking 401(k) contributions into a fund investing in the Standard & Poor 500, which is called a "broad market index." But 500 stocks is not a diversified portfolio. It diversifies exposure in a single asset class - namely, large U.S. companies with a market capitalization of more than $10 billion. That's not a broadly diversified portfolio.
© 2019. All Rights Reserved.
- Seven Steps To Protect Yourself After Data Breach
- 8 Opportunities To Save Tax Before It's Too Late
- Five Bright Ideas About Year-End Tax Planning
- New Year's Resolution: Review Your Estate Plan
- Countdown To Retirement: Seven Steps To Get Ready
- 5 Estate Planning Steps To Benefit Your Elders
- 17 Year-End Moves That Can Preserve Your Tax Benefits
- Finding The Balance For Retirement Draw-Downs
- Key Components Of A Post-Divorce Estate Plan
- Five Documents At The Core Of An Estate Plan
- 10 Common Questions On Social Security Benefits
- Plan For Retirement At Different Stages Of Life
- Are You Still On Target For A Secure Retirement?
- Live Longer And Prosper In Your Golden Years
- 5 Ways That Can Help You Pay For Higher Education