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The Beautiful Concerto of Diversification

In the long run, a well-composed diversified portfolio will outplay any basic scale of notes.

With all the beautiful music in the world, it’s hard to believe there are only seven letters in the musical alphabet. Of course, there are many different variations with sharps, flats, cord combinations and timing that create the sounds we enjoy. 

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Similar to diversifying your investment portfolio, one note or cord a song does not make, however, combining cords and notes will aid in creating the composition you desire. In a portfolio, the combination of stocks, bonds, and cash are only the notes on the paper. One needs to expand within the measures of the sheet music with a mix of U.S., international and emerging market assets. To further enhance the composition, including small and mid-cap positions can portray the sharp or flat notes included in the piece. Playing a flat note on its own may not be appealing, yet, syncing it with the right combination adds depth and style. And that’s just the right hand. 

Now incorporate the left hand with U.S. Treasuries, corporate, and some high yield bonds. Both hands played together further enhance a well-diversified allocation. Not to mention the year the song is created, a.k.a. economic environment, real assets and alternatives, may be added to the mix.

Depending how much the left hand or lower octave notes are included in the music, will vary on the audience. For those preparing for retirement, the left hand may play much of the song, while for those just getting started, the right hand will dominate. In addition, the younger you are, the more you can tolerate the higher octave notes and fast paced creations. Whereas, heading into the retirement stage of life, a soothing rhythm and slower paced song is more desirable.

Regardless of the type of concerto you are seeking, in the long run, a well-diversified composed portfolio will outplay any basic scale of notes.

Michele Sarna is a certified financial planner with Beacon Pointe Advisors and can be reached at (760) 932.0930 or msarna@beaconpointe.com.

Provided as information only and should not be considered investment, tax, or legal advice or a recommendation to buy or sell any type of investments. Asset Allocation, portfolio diversification, and risk strategies cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Form ADV contains important information about Beacon Pointe Advisors, LLC, and may be viewed at: adviserinfo.sec.gov

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