Diversification, Diversification, Diversification

January 2012 Issue PREMIER Business & Finance: Investments The more things change, the more things stay the same.

Having been a financial advisor for the past 26 years, I have come to the realization that the more things change, the more they stay the same.

At the top of a market most people are convinced things will go on that way forever. That’s when the buying frenzy takes place. At the bottom of a market most are convinced the trajectory will remain the same forever. That’s when the panic takes place.

In 1999 many stock market investors, enamored with the internet, piled into anything technology. People believed they were going to get astronomical rates of return ad infinitum because there was no limit to the internet. I guess that was not exactly correct.

In 2006, seminars showing people how to invest in real estate had standing room only crowds. Heck, no money down, easy access to loans, flipping was easy. Most people were convinced the real estate market was nirvana because “real estate never goes down.” Really?

In both cases, of course, the markets were at their apex. Stocks plummeted after peaking in early 2000. Real estate is down substantially from where it was just 4 short years ago. Every market has a cycle.

Today, people who have their money in certificates of deposit, money market funds, or just about any bond purchased over the last couple of years are crying the blues because rates are so low that inflation in commodities (food, oil, cotton, etc.) is outpacing their returns, slowly eroding their buying power.

Since my colleagues (each with 12 years of experience as advisors and planners), and I do not believe putting one’s head in the sand is the correct approach, we suggest our clients go through a semi-annual review of all of their holdings, and their risk tolerance, to determine whether they have the right mix of investments. We think a well diversified portfolio that periodically makes some shifts between asset classes is usually the best portfolio.

More importantly, we want to be sure there are no financial “blind spots” in their holdings that might cause harm to them, their families or their businesses. Since we cater to wealthy individuals and families, dealing with potential blind spots is imperative.

Now that a new year is upon us, whether your investment portfolio is large or small, it’s a good time for a review of your holdings and your financial plan. Don’t put it off.


By Steven R. Wolff, Managing Partner at Wolff, Wiese, Magana

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Wolff Wiese Magana is an Investment Adviser registered with the SEC.  Advisory services are only offered to clients or prospective clients where Wolff Wiese Magana and its representatives are properly licensed or exempt from licensure.  This editorial is solely for informational purposes.  No advice may be rendered unless a client service agreement is in place.


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