Date : March 7, 2019
Category : Financial Planning
With the majority of the first quarter of the year behind us, investors need to examine their portfolios to ensure they are properly diversified and positioned to succeed during the rest of 2019.
We generally recommend that clients diversify portfolios globally across stocks, bonds, real estate, commodities and cash. The specific allocation among these asset classes depends on a number of different factors, but establishing an appropriate strategic asset allocation helps clients weather sudden market swings, manage risk, and pursue their long-term financial goals.
When it comes to asset allocation and diversifying risk, three key factors need to be considered: objectives, time horizon and risk tolerance.¹
Our advisors work with clients to clearly identify and prioritize financial objectives through meaningful conversations made possible by trust, collaboration and teamwork. By considering each investor’s unique goals, time horizon and individual risk tolerance, we engineer portfolios that serve as the engines powering the financial plans (and financial lives) of our clients. As needs change, so do asset allocation and investment strategy; the goal is to keep financial plans on track over the course of everyday life, significant transitions, new professional endeavors, funding college, home purchases, and ultimately, retirement.
Many U.S. investors exhibit some degree of home bias by investing primarily in U.S. stocks and bonds, causing them to overlook the benefits of a global diversification. While U.S. stocks have outperformed international equities in recent years, the “Lost Decade” (2000 – 2009) is a reminder that U.S. stocks can significantly underperform foreign counterparts over long periods of time. ²
Investing in financial assets beyond our own shores has the potential to provide enhanced portfolio stability and improved risk/reward trade-offs. While there is no way to determine which country will perform the best over any given period of time, consistent long-term exposure to foreign markets can be beneficial. Such exposure expands general investment opportunities and enables investors to “capture returns wherever they occur.”
If you are a client, your portfolio has already been diversified through our portfolio engineering process. If you are not a client, contact Harris Financial Advisors for help with assessing your current investment strategy.
1. Friedberg, Barbara. U.S. News & World Report, “7 Expert Investing Moves to Make in 2019”. Dec. 15, 2018. https://money.usnews.com/investing/investing-101/slideshows/7-expert-investing-moves-to-make-in-2019?onepage
2. Dimensional Investing. Dimensional Perspectives, “Why Should You Diversify?” https://us.dimensional.com/perspectives/why-should-you-diversify