Diversity is Key in Retirement Planning
When it comes to planning your financial retirement diversity really is the key to turning a significant profit. You do not want to have all your eggs in one basket. For this reason, it is an imperative to have a well-balanced financial plan at any given time. There are several interpretations of what it means to truly diversify your investment portfolio.
Some professionals believe that to diversify your portfolio you only need to choose stocks in various sectors rather than focusing on one. This was a huge problem when the Dot Com boom went Dot Bust. Valuable lessons were learned during this time frame and now people take it to heart. The chances of experiencing another significant stock market crash are likely. When this happens again your entire retirement hopes, dreams, and funds rested only on the stock market will be in deep, shark infested waters financially as a result.
I do not mean to imply that a stock market crash is probable or imminent by any means. The closest we have come as a nation to a stock market crash in recent memory was immediately after 9-11. The good news is that safeguards were put into place years ago to prevent a crash of the scale that we all know as "The Crash". This means that while you may take heavy hits, chances are the market will recover if you are willing and able to wait it out. However, if you rely solely on stocks you need to take a serious look at your overall investment plan and see where changes should be made.
It goes without saying that no decision regarding your financial future should be made without first discussing them with a financial advisor like myself. My purpose here is to bring up questions and ideas you might wish to talk to me about. I am more than happy to do a Financial Needs Analysis for you.
My recommendation is to have some money tied up in mutual funds and other money tied up in real estate or a Fixed Indexed Annuity, which provides continuous income month after month. I am not much of a gambler and have chosen a low-risk path to retirement financing and funding. For those who are far more adventurous regarding risk when it comes to investing in their financial futures. You are willing to take the risks in securities as an investment to provide a wildly speculative ride. Securities are very risky for investors; particularly those who are novices and even seasoned investment veterans tend to shy away from this sort of investment. If you do invest in securities, I strongly urge you not to risk your entire investment on them.
Mutual funds provide a little safer bet when it comes to your financial future. Again, there are no guarantees, but these are much safer bet than securities. The problem with mutual funds is that there are so many from which to choose that maybe a difficult decision for investors to make. These decisions are the reason that a good financial advisor is so terribly important when mapping out your financial destiny.
All in one funds are essentially a collection of mutual funds. These provide a safe bet for those who wish to find an easy investment possibility that is a conservative and safe to place your money and watch it slowly grow over time. All in one funds become less aggressive in time meaning that as you age, they will become more conservative in the placement in your money to best protect it while still growing your money.
Diversification Is The Key
Diversification reduces the risk associated with individual stocks, but general market risks affect nearly every stock which offers proof why it is important to diversify among different asset classes. Some benefits of diversification include minimizing the risk of loss to your overall portfolio, increasing opportunities for return, safeguarding you against adverse market cycles and reduction of volatility. By placing your money in many different places, you will see a much greater safety net when it comes to protecting your profits.