Hosts Katie Umland and Tim Regan are tackling building a diversified investment portfolio this week – which is a strategy you can use to balance out the risk and potential return of your investments, while offering further protection for your financial plan.
Imagine this: Bob is working on his financial plan for 2024, when he comes across an enticing new investment opportunity in the form of a company’s stock. The company resonates with his values, and he truly believes that his money will grow, so he decides to sell all his other investments and buy up all the company stock he can. But what’s the problem with this picture?
If you put all your investments in a single place like Bob, your portfolio lacks “diversity.” It’s considered a high-risk move because if that particular company loses value or goes out of business, Bob has nothing to fall back on.
A diversified portfolio includes a variety of asset types (stocks, bonds, real estate and more) and industries to reduce risk. The idea is that if one particular industry or company takes a hit, you still have other investments in your portfolio to balance out the loss. And while diversification doesn’t eliminate all risk, it does offer a layer of protection.
“When I think about your portfolio, we really think about making sure that the risk that we’re taking is smart risk,” Tim explains.
For clients at PrairieView, developing a diversified portfolio often begins with a risk assessment. Using an online tool that takes into account your goals, challenges, preferences and other factors, you get a “score” from 1-100 that describes your risk tolerance (with 100 being the most risky).
Tim says, “A risk score is a way for us to gauge what an appropriate portfolio would look like for somebody.”
In this episode, Katie and Tim explore:
- What a diversified portfolio is and how you can benefit from it
- Why risk should factor into your financial plan
- How other factors, like your personal values, can also influence your investment decisions
Hit “play” to learn more about how you can achieve diversification in your portfolio, and how you can access our simple online tool to calculate your risk score with just a few questions.
Key Timestamps and Topics
- 00:00:48 – Tim explains that people’s risk tolerance can vary, and sometimes individuals who are generally conservative may take on high-risk investments due to personal interest.
- 00:02:01 – A risk score helps determine an appropriate investment portfolio. It ranges from 1 to 100, with 1 being extremely risk-averse and 100 being highly risk-tolerant.
- 00:04:52 – Diversification is important, not just in stocks but also across asset types.
- 00:06:22 – The hosts mention that individuals can invest in things they are interested in, like cryptocurrency, but it should be done with your risk score in mind.
- 10:31 – Tim and Katie touch on the concept of ESG (environmental, social, governance) investing and the nature of moral investing, specifically with the Disney company.
- 00:15:14 – Tim explains that the board of directors represents shareholders and makes decisions on behalf of the company.
- 00:17:58 – Our hosts encourage listeners to determine their risk scores and visit the Prairie View website for further assistance in building a diversified portfolio.
- 00:25:38 – Both Katie and Tim thank listeners for joining the episode and wish them a Merry Christmas!
3 Key Takeaways
- Explore how a diversified portfolio can protect your retirement savings against market volatility and other unknown variables.
- Learn why knowing your risk tolerance is crucial when building a diversified investment portfolio.
- Find out how some investors align their investment decisions with personal morals and values.
Links
Build a Diversified Portfolio Fit for Your Goals
Want to find your own risk score? Looking for guidance on building a risk-savvy, diversified portfolio? Click here to connect with a member of the PrairieView Wealth team and get started today.
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