By Campbell Wealth Management
As the charts from JP Morgan below demonstrate, adding non-correlated assets to a portfolio can lower
volatility/risk. Additionally, in many
cases having a more diversified portfolio not only lowers risk, but it can also
provide a better return.
The idea is to have assets
that zig when other assets zag.
Of course, if one has an
appetite for risk and wants to “swing for the fences”, it is best to have a
concentrated portfolio of a few securities.
The problem of course is selecting the right securities.
Older investors typically
need to take less risk, as there is less time to make up for any losses that
may occur in their portfolio. Younger
investors have plenty of time, and should therefore position their portfolios
accordingly.
There are many other
investable assets other than stocks and bonds.
Examples include commodities, real estate, master limited partnerships
and private equity. Historically, these
assets have not correlated 100% with the stock or bond markets, but have still
provided a return.
Campbell Wealth
Management
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