Diversified Portfolio

The concept of diversification is familiar to most investors. Also known as “not putting all your eggs in one basket,” a diversified portfolio combines a variety of assets to reduce your overall risks, create more consistency and improve overall portfolio performance. So if you’ve been wondering, “why do I need to diversify my portfolio,” you’ve come to the right place.

“Diversify across securities, across asset classes, across markets – and across time.” – Charley Ellis

Why You Need a Diversified Portfolio

At its core, a basic diversified portfolio may include several investment categories like cash, stocks and bonds. The allocation to each of these categories would be based on your investment goals, tolerance for risk and timeline. The goal of a diversified portfolio isn’t necessarily to boost performance; it’s more about establishing a risk management technique.

Simply put, if you want to yield better (and safer) results, keep investments smartly diversified.

Regardless of whether you are aggressive or conservative with your investments, creating a portfolio that includes multiple investments has many benefits accessible to all investor types, including alternatives.

Alternative Investment Diversification

While stocks and bonds traditionally represent the construction of a portfolio, alternative investments provide a unique opportunity for further diversification. In the past, access to sophisticated alternative investment strategies has been largely available only to those who managed extremely large pools of capital. Fortunately, because they have become increasingly popular, this exclusivity is changing.

Now the advantages of “alternatives” is available to most investors.

Alternative investments can be grouped into liquid real assets, alpha-driven investments or private market investments. They can include investments such as venture capital, private equity, hedge funds, managed futures, real estate investment trusts, commodities, and derivatives contracts. They’re basically any investment other than the traditional long-only equity or long-only bond investment. Because they are so diverse, investors have plenty of opportunity to find new exposures which are not accessible with the traditional investment.

And since alternatives typically have a low correlation with those of standard, mainstream asset classes (shares and bonds), you are able to reduce your exposure to market risk if those asset classes are underperforming. Alternatives will keep an investor’s portfolio on track to deliver (higher) returns and preserve capital- making them the appropriate choice for a diversified portfolio.

Reduce Risk with a Diversified Portfolio

The concept of alternative investing goes well beyond what a traditional portfolio might look like and broadens the diversification opportunities for investors. Let HudsonPoint Capital guide you to generate better risk-adjusted returns and avoid costly mistakes by managing risk levels only you feel comfortable perusing for a diversified portfolio.

Contact us today at 732-321-5244 to identify any risks in your current portfolio and discover new ways to mitigate those risks by diversifying your portfolio strategically with alternative investments. Our financial advisors will help you understand and analyze your options before making an investment decision.