Effectively Diversify

Diversification helps to spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Assets should be evaluated not by individual characteristics but by their effect on a portfolio. An optimal portfolio can be constructed to maximize return for a given risk level.

• Combine Multiple Asset Classes
• Diversify Globally
• Invest in Thousands of Securities
• Invest in High-Quality, Short-Term Fixed Income

Diversification does not guarantee a profit or protection against a loss; however, effective diversification is designed to limit portfolio losses during a severe market decline.

Modern Portfolio Theory has led to a better understanding of risk and return which we use to customize your portfolio according to your specific preferences to optimize returns. Developed by Harry Markowitz and published under the title "Portfolio Selection" in the 1952 Journal of Finance, it states that it is not enough to look at the expected risk and return of any one particular stock.

Diversification reduces the inherent risks in holding an individual stock; however it is not about picking stocks, but choosing the combination of stocks which best helps you to reach your investment goals and provides financial well-being.

We seek to capture market rates of return by investing in large numbers of stocks in selected asset classes resulting in portfolios with thousands of stocks. We exclude certain groups of stocks with heightened risk or inefficiency. 

A common mistake is having too much equity in the company that is paying your salary. You work for a good company that gives you a stock bonus’ plan, gives you their stock in your 401(k), and grants you options to buy their stock. The result is that you fail to diversify as Dr. Markowitz suggests because you are focusing on your company rather than your portfolio.

Modern portfolio theory tries to create portfolios that maximize return for a given level of risk – or alternatively, that minimizes risk for a given level of return. MPT compares a portfolio’s standard deviation—how much its return may vary from its statistical mean return over time—to its return. An efficient portfolio navigates the risk/reward tradeoff by combining investments based on their level of risk, their expected return, and their correlation with other investments in the portfolio. MPT argues that a portfolio that doesn’t do so isn’t optimized—in other words, it takes too much risk for the return it provides.