Every investment has some level of risk associated with it. When your investments are concentrated in just a few assets, your portfolio’s performance becomes highly reliant on the success of one or two companies and industries. This is a high-risk strategy because poor performance in just a few stocks can cause your overall portfolio value to plummet.
This lack of diversification is a common problem for investors and one that, without careful management, can cause problems for even experienced investors. People tend to stick to what they know, often subconsciously choosing their investments from a restricted set of asset classes or industries that they are familiar with.
Effective Diversification With Pence Wealth Management
By diversifying your investments across many companies, industries, locations, and asset classes, the overall value of your investments will become less reliant on the performance on any one asset. This helps to manage the significant changes in any one area and reduces the likelihood that your entire portfolio will trend downwards at the same time.
To strive for this, we work with you to manage a balanced portfolio that takes into account your investment objectives and attitude to risks. To seek appropriate diversification, we may recommend multiple investment strategies, including using mutual funds, alternative investments, private equity, and hedging vehicles.
Concerned About Diversification?
Over time, effective diversification seeks to provide smoother returns, less stress, and reduced risk. If you choose to work with us, we will work towards your portfolio in being properly diversified, enabling your portfolio to pursue growth while keeping your risk at a level you are comfortable with. Contact us today using the form below or by calling 800.731.3623.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non- diversified portfolio. Asset allocation and diversification do not protect against market risk.