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You know you need to diversify your investments, especially if you are planning your retirement strategy. But how? Where do you begin? Wealth CAP is an online investment company that specializes in retirement income planning. We sit down with every client and formulate an individual retirement plan based on many factors. We utilize dynamic bucketing portfolios (DBPs) in our diversification strategies that incorporate safe investments, market investments, and alternative investments, such as real estate and precious metals, that will offer you the best return on investment with the level of risk you are comfortable with and the level of liquidity you need. We offer free investment consultations where we’ll take a look at your goals and formulate a comprehensive strategy that will work for you. Contact us today for your appointment, and below, we’ll take a look at the major factors you need to consider when you sit down to diversity your portfolio.

FACTORS YOU NEED TO CONSIDER WHEN DIVERSIFYING YOUR PORTFOLIO

  1. Your goal(s). We all have things we want to do in our lifetime: visit Europe, climb Mount Everest, go to college, buy a home, or retire. It’s important to have your goals in mind when diversifying your investments. This will not only give your the wherewithal to actually save for something, but it will also give you a reference point in which to plan your life around.
  2. Time frame (or time horizon in financial matters). Using your goals, figure out how much time you have to save for college or retirement or before your European trip. How much time you have until your goal directly correlates to your level of risk.
  3. Level of risk (or risk tolerance in financial matters). Risk tolerance is your attitude towards risk, which can be directly affected by the time horizon you have.

 

THE CASE FOR SAVING FOR RETIREMENT

Let’s say you have 25 years before you retire. At the beginning of this 25 years, you’ll have a high tolerance for risk, meaning you will be willing to invest in financial instruments that hold a higher risk value, such as international stocks, because if you suffer losses, you’ll have more time to make that up. However, if you have great gains, the risk would have been worth it for long-term growth.

 

However, all of this depends on if you are comfortable with risk in the first place. You could be 25 and have your whole life ahead of you and just want to play it safe. After all, you have the time value of money working for you (how money grows upon money with time). Why take any risks at all?

 

This is where diversification is at its finest. You can have an aggressive asset allocation portfolio that includes high-risk investments, such as alternative investments, and still have some low-risk investments in the pot, such as money markets. This is the beauty of tailoring your diversified portfolio to meet your needs.

 

The other major factor to consider when diversifying your portfolio is that your portfolio will be constantly changing as your life constantly changes. Let’s say you met your first goal: saving for a down payment to buy your first house. Fantastic! Now, you have a new goal — saving for your wedding. This may require a shift in your time horizon and your asset allocation. Having an investment professional such as Wealth Cap whom you trust partnering with will be invaluable throughout your life.

 

Besides your goals changing, your time horizon will be changing as well — it will be constantly shrinking as retirement age creeps nearer. Naturally, you’ll probably want to reduce the amount of high-risk assets you hold since you’ll have less time to make up for a loss in your diversified portfolio, and replace these assets with lower-risk.

 

Once you enter retirement, the amount of high-risk assets in your diversified portfolio should be minimum. Your goal now is just to maintain the total value of your portfolio, and try to exist on your interest and dividend income that you’ve accumulated in the course of your lifetime. Lower-risk investments with the potential to generate income should be the vast majority of your holdings. Still, diversification needs to be maintained in your safe investments as well, and some amount of moderate- to high-risk investments will be needed to maintain growth. One risk of this strategy is outliving your investments, which just means more inheritance and blessings to your kin.

 

WHY WEALTH CAP

Wealth CAP developed its signature dynamic bucketing portfolios (DBPs) with the whole goal of offering our clients the most amount of diversification possible. We keep security, growth, and access in the forefront of our decision-making when it comes to allocating your asset portfolio. We understand that each person is unique and has a specific set of goals he or she wants to achieve. We begin each financial consultation with discovering your goals, such as legacy planning, retirement planning, or saving for your kids’ college education. Once we know what we need to be saving for, we can then take a hard look at where you’re currently at in meeting those goals, and then forecast and develop a plan for where you need to be.

 

The investment professionals at Wealth CAP are passionate about education and offer individual financial wellness education opportunities to enhance your investment knowledge. No matter what your financial goals, from saving for college and your 25th wedding anniversary trip to retirement income planning, Wealth CAP can help. Contact us today for your free consultation!

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