Diversification Video, part I
Join Alex Duty, CFA, CIPM, as he delves into the functionality of diversification. Learn more about investment strategies and the science of a well-diversified fund. Using Alex’s knowledge, one can better understand and achieve higher risk-adjusted returns. This is accomplished by employing a variety of different asset classes in a portfolio. “Diversification does not increase expected returns by itself. However, diversification does decrease volatility without compromising on expected return.”
The lessening of volatility can bring enormous peace of mind. To achieve this without forgoing expected returns is what investors want. The secret sauce of diversification brings it all together. Reducing exposure to the two core asset classes, stocks and bonds, allows for increasing exposure to alternative investments. As a result, there is a decreased correlation between assets in the portfolio. This, in turn, allows for returns to be maintained while at the same time leveling out the volatility. Furthermore, the smoothing out of “highs” and “lows” can help to preserve principal.
In this video, Alex will explain in depth why this strategy works for helping to achieve investment goals. Also, he will break down the mathematical logic and historical data in a way that is accessible. If you wish to read more about this topic, please take a look at Alex’s white paper on the subject. Enjoy the video and let us know if you have any lingering questions. Otherwise, stay tuned for part II next month!
Alex Duty, CFA®, CIPM is a Portfolio Manager at White Oaks. He performs investment research, asset allocation of various strategies, assesses client portfolios, and assists with overall client communication.