ITHACA, NY – 2/23/2016 — Portfolio diversification is an important investment strategy that reduces risk and positions you to achieve your investment goals. This is not something most people can do for themselves. Creating a diversified portfolio requires the expertise of a financial advisor. It is a complex process that takes a number of factors into consideration. Tompkins Financial Advisors works with clients to align their financial goals with sound investment strategies.
What factors need to be considered for diversification?
A sound investment strategy is based on a number of personal factors. These include: your goals; your investment horizon, or the period of time you will have for active investment, and when you want to achieve particular goals; your risk tolerance; how much liquidity you need, meaning how quickly an investment can be turned back into cash; how much you have to invest and whether it will be incremental and over time or a large lump – sum investment.
All of these are factored into an investment strategy that will allocate your assets to best meet your goals and needs. “We stress the importance of diversification, but not just for diversification’s sake,” says Chris Kim, Tompkins Financial Advisor’s Chief Investment “We have recently seen dramatic moves in a number of markets as investors come to terms with the deteriorating growth outlook for the global economy. However, one notable aspect of the volatility we saw in January was that not all asset classes were affected equally,” he said.
“This has meant that investors that have introduced more diversification into their portfolios have been rewarded with significant outperformance, relative to those that invest predominantly in non-diversified portfolios.”
What is a diversified portfolio and why is it important?
With investment comes risk. Portfolio diversification is a way to mitigate risk. A diversified portfolio means that your money is invested across asset class and industries and likely will include stocks, bonds, real estate, cash accounts like money markets, retirement accounts and more. If you put all your investments into one stock or one industry, your risk is high. If the industry has a set back, typically the associated stocks will drop in value. If your investments are diverse, not just wide, but deep, your level of risk is minimized. While there is no guarantee against loss, a diversified portfolio spread among stocks, bonds, cash, real estate, money market funds and others types of investments is the best approach to minimizing risk and sustaining the grow of your investment over time. Your financial advisor can help you create the right mix of investments and the right mix within investments.
What are the investment options?
Within the basic investment classes there are many subclasses. Should you invest in US or international stocks, and in which industries? Will you diversify through in an index fund like the S&P 500, or choose corporate or government bonds? U.S. stocks provide addition options. Large cap investments are shares of stocks issued by large companies with a $10 billion or more capitalization, mid-cap stocks are investment in companies whose capitalization is $2 -$10 billion and small cap stocks offer investment opportunities in companies smaller than $2 billion. Should you hold international securities in your portfolio and what about real estate investment trusts or money market securities? How will your funds be allocated? What percentage of your investment should be go into stocks, bonds, international funds, real estate and cash or a 401K or IRA retirement account?
“The field of investments is wide, deep and complex”, says Kim. “Tompkins Financial Advisors work with clients to carefully consider which investments or variety of investments will have the best return on investment. We try to mitigate losses with a sound diversification strategy that over time will help our clients meet their financial goals.”
About Tompkins Financial Advisors
Tompkins Financial Advisors is an independent, fee-based, wealth management firm with offices throughout New York and southeastern Pennsylvania. We take tremendous pride in our fiduciary approach to serving our clients’ best interests which has led to our 95+% client retention rate.
Tompkins Financial Advisors is part of Tompkins Financial Corporation, a financial services holding company, publicly traded on the NYSE MKT under the symbol TMP. Tompkins Financial was founded in Central New York over 175 years ago and is still headquartered there. The company is committed to creating long-term value for our clients, our communities and our shareholders. Tompkins has been recognized as among the strongest and best performing financial institutions in the country by numerous third party organizations, including The Staton Institute, Sandler O’Neill & Partners and KBW (Keefe, Bruyette & Woods).
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Company Name: Tompkins Financial Advisors
Contact Person: Kim Bellavia
Country: United States