Most investment experts will tell you, though it does not guarantee against loss, diversification is to achieve an important part of your long-term financial goals.

May not agree with what they are, but what is the true meaning of diversity.

Who came to our office seeking help people think they are diversified. After all, they share in the portfolio, bonds and mutual funds. They have large stocks and small stocks, and investing in emerging markets or variable annuity even something.

I think, though, not diversification. These investments still are directly related to market

Think about it: In 2000 and 2008, it does not matter what match you have, if your investment is linked to the market, you lose money. A lot of money

The old model of diversification – in which the stock market risky assets and bonds are considered safer – is based on something called “modern portfolio theory,” in 1952, which means that developers it not so. Modern the

One or two things, I ask everyone who comes to our workshop are:

“If you go to a cardiologist who says you need heart surgery, they intend to do the same manner, they did so in the 1950s, how would you do? “

Most people said they would run out the door and get a second opinion.

Unfortunately, the vast majority of us and still invest their own money in the same way in the 1950s, 60s and 70s who completed the meeting. And today we are in a very different market than we do then, thanks to the Internet. We are moving large amounts of money every day, every hour. Market moves faster – which is more volatile. A news, even a rumor, can have a same effective date – good or bad

However, only a small part of the enterprise in the US economy in public. According to JP Morgan Asset Management in 2016 notes, the number of listed companies fell by nearly half from its peak of 8025 in 1996, which means there are a lot of private companies where you can not buy stocks (Uber. And IKEA, for example, )

This is a giant people graspBig things – a very small portion of the earned retirement dollars to invest in our economy for all their hard work. They think that because they have a mutual fund, they have their base in cooperation Vered. (Even if they do not really know what is in these funds.)

Some more history: it used to be, way back when, fund companies do not exist in the United States. Most people have a savings account because the securities are too expensive for the average person. Then, the Massachusetts Investors Trust was incorporated in 1924 to attract investors who like the idea of ​​pooling their money and others have gone to Wall Street.

Market in 1929 after the collapse of the government and industry leaders came up with regulatory safeguards to restore investor confidence, leading to the Investment Company Act of 1940, requires companies to make financial information relating to the Fund’s portfolio periodic reports controlling shareholder compensation.

But there are hidden costs of people tell us they do not know. They may know the expense ratio, the fund report, rather than the other fees and transaction costs, sometimes twice as expensive to make money, because they want to. Not to mention the tax efficiency of mutual funds sometimes poor: if you pay dividends, whether you get the money or not, you have to pay taxes. Therefore, even when the market rises, you may not make as much, do you think these investments

I prefer building truly modern method called asset class portfolio diversification, where you at least there are three separate hopper work different from each other:

• 1. Shares : The stock market is a good investment long-distance, but it should be accessed in a more cost efficient and transparent manner. Working with independent consultants will give you more purchase options, therefore, the ability to build a more diversified portfolio.
• 2.Alternative Investment : This is your branch for a moment, put money into something, is not traded in the market. These investments include real estate, commodities, private equity, hedge funds and so on. Volatility is still a factor, of course, but you can look at risk in a way that is specific to your investment, rather than the overall market. If the market goes down, these investments will not necessarily be affected.
• 3.On the contractGuaranteed Income : Here, you create income, you can not live long. Annu life insurance or both, for example, can also help long-term care costs. Or you can use to create your own retirement annuity, if your employer does not provide. These contracts ensure that a portion of the assets of the upside of the market, and do not lose when the market goes down.

Times have changed, investors need to be changed. Talk about your portfolio modernization of financial professionals. Sit down, I went to what you have, and then discuss what can be changed to further diversify your holdings. And be sure to participate in what the risks and rewards to talk about

If your current planners pushed back, and want to stick with his or her old school program, please remember: the doctor is not the first who offer the only two comments. It may be time to find a new, forward-looking advanced Iser.

The article of this publication and observations for general information only, and is not intended to provide a recommendation for any particular subject or recommendation. We recommend that you consult your accountant, tax or legal advisor regarding your personal situation.

Alternative Investment Fund, said speculative investment and involve a high degree of risk. Investors may lose all or he / she is a large part of the investment. Investors must have the economic ability, maturity / experience, and are willing to bear the investment risks in the alternative investment funds. In any investment alternative investment funds should be discretionary capital set aside strictly for speculative purposes. Alternative investment fund offering documents are not reviewed or approved by the federal or state regulatory agencies. Some alternative investment funds may have little or no operating history or performance, and can be used or assumed formal performance may not reflect the actual completion of the transaction by the manager or consultant, should be carefully examined. Investors should not place undue reliance on assumptions or form of expression.  

Annuity and insurance contracts contain exclude, restrict, reduce benefits and terms in order to maintain their power. Investors should consider the investment objectives and the underlying portfolio of contracts, risks, charges and expenses carefully before investment. Please read more complete information annuity prospectus, before all charges and ex penses include investment or remittances.