Having spent decades in this industry, I can tell you one truth with absolute certainty: no matter how sophisticated the strategy, diversification remains one of the most powerful tools in wealth management. You’ve likely heard these timeless secrets from me before, but when the markets are volatile, they’re worth revisiting.
Secret #1: You have to actually do it.
It sounds obvious, but many investors never truly diversify. They might hold a dozen stocks or multiple stock funds but fail to spread their risk across asset classes, geographies, or sectors. Proper diversification involves intentional allocation across stocks, bonds, private markets, real estate, alternatives, and sometimes even cash.
Secret #2: Balance risk by investing in non-correlated assets.
The goal isn’t just to own more, but to own things that don’t behave the same way at the same time. We call this low-correlation investing, and it's the heartbeat of a resilient portfolio.
For example, when equities are zigging, we want something in the portfolio that might be zagging or at least staying still. This means including asset classes that don’t react the same way to economic shifts. Stocks, bonds, real estate, private equity and credit, international markets, and other assets all have their own rhythm. When one takes a dip, another may hold steady or even thrive. That’s where the magic happens!
Secret #3: The hardest part is sticking with it.
When the S&P 500 is up 25%, it’s natural to wonder, “Why do I own anything else?” And when the market drops, some may think, “Why didn’t I move everything to cash?”
But diversification isn’t a fair-weather friend. It’s a strategy for all seasons. You wouldn’t abandon your umbrella just because the sun came out for a few days or months. Likewise, market cycles will shift and the best thing you can do is remain committed to a thoughtfully diversified plan that’s built for the long run.
So, how can Kensington help?
Many of our clients have expressed satisfaction (and even a bit of surprise) at their portfolio performance over the past several months. That’s not luck; it’s discipline. And it’s the result of applying diversification principles consistently.
If you’re wondering whether your portfolio is truly diversified, we’d be happy to take a look. Remember, diversification isn’t always exciting, but it’s effective.
Paul A. Gydosh, Jr. is founder of Kensington Wealth Partners, Ltd., a premier financial planning organization centrally based in Columbus, Ohio with clients in 26 states and major cities including Chicago, New York, Boston, Washington D.C. and Miami. He is also co-author of “Master Your Financial Success: Retirement and Legacy Secrets from Planning Professionals.” Paul regularly addresses industry, academia and client organizations on topics of current interest. As a leader and mentor in his field, Paul’s commitment to continuous improvement has enabled Kensington to serve the financial needs of some of the most successful individuals, families, and businesses over the last 35 years.
Securities and investment advisory services offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth, Inc.