Last month I touched on the benefits of portfolio diversification, namely through the use of stocks and bonds. Today, I want to discuss why low interest rates and positive correlations between traditional asset classes may be the end of the traditional 60/40 portfolio, and why adding alternative investments into your portfolio might be a prudent move.
Diversification is one of the cornerstones of traditional investment advice. The most common saying we hear is “never put all your eggs in one basket” and the phrase holds true. Markets go up and down through economic change, business cycles, and a wide variety of factors which can change investment outcomes. Managing these peaks and valleys is the primary goal of an investment plan. The best possible defense against risks in any investment strategy is diverse and well-balanced financial planning.