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Diversification Saves The Day!
Brett Lozowski
We have often heard the phrase, “Don’t put all your eggs in one basket.” The risk is if your basket breaks, then you lose all of your eggs. It serves as a timeless proverb that is also applicable to financial markets.
Recent headlines have rattled the US Stock Market (S&P 500 index) with concerns of slowing growth, slower consumer spending, tariffs and more. Growing fears have caused US stocks to tumble about 7% from their recent all-time highs. For reference, US Stocks are only down 2% to start the year.
Despite the turbulent news cycle, other asset classes have done quite well! The International Stock index (Vanguard ex-US) has rallied 8.0% to start the year. The bond market has also started the year off strong by gaining 2%.
In our investment approach, we target having 50% of your stock exposure to US markets and 50% to international markets. This diversification takes advantage of the alternating cycles where one asset class outperforms the other.
There are even time periods where bonds do better than stocks. That has been the case so far this year. Each market cycle is unpredictable, and having a proper balance to different asset classes is prudent.
Diversification remains key to being prepared for an uncertain future. This recent market upheaval is a perfect example. If you look at your current portfolio balances and compare that with the headlines of how poorly the market is doing, you may be pleasantly surprised. The overall market isn’t as bad as the headlines make it seem.
Thank you for putting your trust in us. The upheavals in the world are concerning, and we are here to hopefully help make sense of it all. Let us know your questions and how we can better support you.
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