A quote commonly attributed to Benjamin Franklin includes some timeless advice that could also apply to basic investing: “The man who does things makes many mistakes, but he never makes the biggest mistake of all – doing nothing.” Without the benefit of hindsight, investing involves risk. There is no such thing as a free lunch or a perfect pitch in investing. To be sure, there are many ways to minimize, but not necessarily eliminate, risk. This article, from Financial Planning magazine, reviews the benefits of asset class diversification in your investment portfolio. Diversification can provide benefits above and beyond mitigating risk and volatility. However, to reap the rewards it requires both patience and discipline. With that said, we understand that diversification isn’t for everyone. Some may prefer a more narrowly focused portfolio based on individual circumstances and preferences. By design, a broadly diversified portfolio will not outperform the highest returning asset class in a particular year. However, as shown in the linked article and despite some turbulent times for investors, it has returned approximately 7% this millennium, outperforming many individual asset classes and with a much lower risk and volatility profile (measured by standard deviation). At Peachtree, our clients are long-term investors, not traders or market timers. They prefer the peace of mind knowing that they are invested in a disciplined and diversified strategy. After all, successful investing is about good behavior rather than just good timing. We hope you enjoy the article. If you should have any questions about this topic or other wealth management subjects, please feel free to contact us.
Financial Planning Magazine: Does Patience Really Pay Off?