Is Diversification the Key to Success?

Apr 30, 2019

DiversificationTaking a look at historical market performance, it’s easy to see that asset classes fall in and out of favor with great frequency.

Classic-Periodic-Table-2019

Source: https://www.callan.com/wp-content/uploads/2019/01/Classic-Periodic-Table-2019.pdf1

Looking at the extreme swings in asset class performance can leave clients hesitant to make decisions about where to invest. They may be tempted to stay on the sidelines and cling to less active cash alternatives.

As with any investment there’s no guarantee of returns, but the rise of cash in 2018 may have your clients giving this asset class serious consideration. You can use this historical view of market favorites to specifically illustrate the underwhelming performance of cash since 2008, which aligns with the Great Recession. You’ll also want to point out that while cash was the best-performing asset class in 2018, it returned essentially zero,1 suggesting cash continues to be a less than ideal long-term investment option — an important distinction and an even more important conversation to have with your clients.

Many of your clients may readily understand the logic and value behind portfolio diversification, but they may not be willing to fully apply it to their long-term investment strategy. 

Learn more about how portfolio diversification and risk control annuities work together to reduce the potential impact of extreme market volatility on long-term investments in Fluctuating Investment Returns: How Is Market Risk Managed by Diversification? Click the button below for your copy of this insightful fact sheet.

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SOURCES:

1Callan, LLC, The Callan Periodic Table of Investment Returns (1999-2018), Undated

MGA-2163865.2-0319-0421


Topics: Risk Tolerance