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Do You Understand The Term Diversification?

Diversification is a term that is often discussed, but is still widely misunderstood amongst investors today. When the financial markets collapsed in 2008, many investors were left wondering if the opportunities to truly diversify were fewer than they once believed.

Diversification: Is NOT having your money at four different banks. Many investors still do not understand how FDIC insurance works.

Diversification: Is NOT having your money at four separate financial institutions. Many wealthy investors often believe they spread their diversifications risk by hiring money managers at different brokerage houses. This is hardly ever the case.

Diversification: Is NOT leaving your 401(k)’s at three old employers. It’s extremely scary to see how many people buy the same mutual funds through their 401(k) at different employers and never really look at their investment strategy as a whole.

Diversification: Is NOT necessarily done by buying different mutual funds or exchange traded funds from the same fund family.

Diversification: Is NOT subtracting your age from 100 to get your stock and bond mix.

This obviously isn’t an end all be all list, but hopefully you get the point. Diversification isn’t as simple anymore as the age old adage, “Don’t put all of your eggs in one basket.” You need to make sure more than ever today that the baskets you put your money into will truly reduce your risk while helping to optimize your return because so many baskets may be more alike than you think. Diversification would appear to be an easy task to accomplish and there is no model that will work generically for an investor. Keep a close eye on this one with your portfolio for the future!

Written by: Ted Jenkin
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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

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