Are You Diversified? Part II

Posted on July 28, 2020 by Trevor Shakiba

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After everything that went on in 2020, you have to ask yourself what happened. The market is flat from January 1, which would shock a lot of people. And the market represented by the S&P 500 is positive to date, which just happened a few days ago. The biggest question a lot of investors should ask is, “Are you diversified enough?” So, here are five more tips on how you can get an answer.

Now is the Time to Look at What Happened to Your Investment Portfolio

Look at how you did in comparison to the market. Did you go straight down and straight back up? Were you less volatile overall? If you answered no to any of these questions, you may not be diversified enough.

How Did You Feel in March and April, and What Did You Do?

Did you panic or lose sleep when everything crashed? Did you let emotion influence your investment decisions? Everything hit the fan in March and April. Things got crazy, and the market was volatile. When it all happened, did you sell everything so you can buy guns, gold, and ammunition? Pause for a moment, and look back at how you reacted during that time – not just as it relates to the performance of your investment portfolio but to you as well. If you did any of these things, you may not be diversified enough.

Is Your Risk Tolerance Aligned with Your Comfort Level?

Back test your portfolio, and analyze what would have happened. Look at the worst case, best case, and most likely case. And be sure to think about it deeply. You have to be comfortable with what those scenarios could be. Did you panic in March and April? If you did, you’re not at the right risk tolerance.

Now is the Time to Adjust and Potentially Reallocate

The market went back to where it was on January 1, so now is the time to think about these things and potentially reallocate. 2020 isn’t over, so we’re not out of the wood yet. We still have an election coming up, and tensions with China are rising. Everyone needs to be careful with the market at these levels, so you want to get your allocation and risk tolerance in line with your investment portfolio.

Don’t Forget About Alternative Asset Classes and Real Estate

You don’t want all your investments to go up and down with the market. You need to have others that will give you downtime protection, because it will reduce your risk. Look at things that are outside the market (such as precious metals and real estate). You want to have assets that zigs when the market zags, and be sure to look at where you are in your timeline of what you want to achieve.

Everyone’s situation is different, so you want to get a second (or even a third) opinion. You want to be prepared for the rest of 2020. And if you’re not comfortable, make sure you find a Certified Financial Planner. For advice on how you can create a more diversified portfolio, get in touch with Trevor Shakiba at Shakiba Capital.