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Does Your Investment Portfolio Fit a Diverse Market?

So, you’ve put together an investment portfolio. You took the initiative to invest in your future, quite literally, and that is a fantastic contribution to your financial well-being. 

But, let’s not stop there. Are your investments diverse enough to maximize your earnings potential?

If you’ve landed here, that probably means that you aren’t sure. And, that’s okay! 

Here are a few thoughts to consider. 

What Does Diversification Entail?

You will diversify within three categories: stocks, bonds, and short-term investments.

Stocks

Stocks allow for higher growth over a longer period. Of course, with higher reward comes higher risk. These are the most aggressive pieces of your portfolio, which may provide you a significant return.

Bonds

Bonds can help add security to your investment. In exchange for a lower yield, bonds provide the stability that stocks don’t offer. These are less volatile and shield your investments from the dramatic highs and lows of the stock market. A high-yield bond may provide a high return but with a higher risk. 

Short-Term Investments

What Does Diversification Depend On? 

Your investor will take into account your overall goals, time, and risk tolerance before allocating your assets. Based on these factors, the investor will diversify your assets in a way that achieves your financial goals, while bringing the highest possible return.  

If you are looking for a riskier approach with a higher return, for example, the investor would lean toward stocks. Whereas, if you were looking for a safer approach in exchange for a lower return, they would lean toward bonds. 

Benefits of Diversification 

So, why diversify in the first place? Why not put all your eggs into one basket? 

Diversifying your portfolio offers the following: 

How to Identify a Well-Diversified Portfolio

Still aren’t sure where you (or your portfolio) stands on diversification? 

Here are a few ways to determine if your portfolio is getting the attention it needs to thrive in a diverse market:

Your financial advisor can guide you on investing based on your long-term financial goals. Southwestern Investment Group takes a holistic approach to keep you on track. 

Contact Southwestern Investment Group today to schedule a consultation. 

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