Beth Pinsker: Your portfolio needs diversification. Here’s the best way to go about it in these volatile times

by | Oct 15, 2022 | Stock Market

If you’re trying to figure out how to make sure you’ve always got the best mix of investments, there are general rules, questionnaires about risk and all sorts of academic approaches. But it can be hard to translate the conclusions to your situation, especially if you, like most people, have a complicated financial life with many unrelated accounts.

A working adult might have a 401(k), IRA, Roth IRA, a taxable brokerage account and a money-market account. You might also have a crypto wallet or two, a high-yield savings account with CDs, a TreasuryDirect.gov account for I-bonds and other Treasurys, pensions, or other retirement plans lingering at old employers. Double that if you’re married. Take the classic 60/40 portfolio construction, which means putting 60% of your investments in stocks and 40% in bonds, or other fixed-income investments. If you were relying on that, you’d be pretty confused right now. In today’s market, the 60/40 portfolio is either dying or rising from the dead, depending on whom you ask. And if you have money in many different places, what parts of it count toward that portfolio ratio? You can always value the underlying message of the 60/40 portfolio, which is about diversification. You need both stocks and bonds as a hedge, because typically when one is up, the other is down, and you can cut your losses this way. The bull market run-up after the 2008-2009 Great Recession seemed to change that equation. People needed extra convincing to stay in bonds, given how minuscule yields were.  Then this …

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