Facebook Twitter LinkedIn
Register for our daily updates!


Featured Advisor



Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management

City:Northbrook

State: IL



BIOGRAPHY:
At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

Click to see the full profile


Share |

The Benefits of a Diversification Strategy

Investors use a diversification strategy to make sure they are invested in multiple, non-related industries or companies. 

| BY Kent McDill

Even a new investor knows the value of having a diversification strategy, but they may not fully understand the reasons behind it.

A diversification strategy is the best way to know that an investor’s portfolio is not going to be wiped out by one bad corporate decision or industry failure.

It also protects an investor from the occasional bad investment decision, operating on the theory that “nobody’s perfect.” A diversification strategy allows investors to make the occasional risky investment, or to simply be wrong about one stock or financial product. It’s protection against such errors in judgment or performance.

One key to a diversification strategy is to avoid putting all of your investment dollars into one industry, even when you are buying different products that represent that industry. Investment in the auto industry was at one point a good idea, but when things went bad for the automotives, it went bad for all of them.

RELATED: Diversification Drives High Net Worth Interest in Alternatives

Time constraints also affect one’s diversification strategy. If an investor can wait for an investment to pay off, then the stock market works well, as an investor can wait out a significant downturn in the stock and watch it recover. A diversification strategy would then call for an investor to have some short-term gain investments such as money market funds or certificates of deposit, which carry almost no risk but have much smaller returns.

If both short-term and long-term gains are covered in a portfolio, an investor could look to alternative forms of investment, such as real estate, private equity or precious metals as a way to diversify the portfolio. Each of those types of investments carry their specific type of risk.

A financial provider or advisor can make sure an investor has used a diversification strategy that will have a built-in safety in relation to market conditions. It is important that an entire investor’s portfolio would not be affected by one kind of market event.

 



About the Author


Kent McDill

kmcdill@spectrem.com

Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.

In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.

McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.

McDill is the father of four children, and an active fan of soccer, Jimmy  Buffett and all things Disney.