Do You Have All Your Eggs in One Basket in Retirement?

Diversification is a conversation that you should have to avoid risks in retirement. You’ll hear the term of having, or not having, “all your eggs in one basket.” Clients even come to us with the idea of three financial advisors. They do not want to have all their money in one place.

But what is diversification, really?

Let’s imagine that you have three advisors with three different custodians:

1. Schwab
2. Fidelity
3. Vanguard

You have three custodians and three advisors. Does this mean that you’re diversified? If all three advisors have a similar philosophy, your investments in these custodians are likely going to be similar.

For example, all three may choose large-cap growth.

If you have money with each advisor across large-cap stocks, you’re truly not diversified.

Could You Be Widely Diversified with One Advisor?

Retirement planning needs to feel secure. You have risks in retirement naturally, but you can diversify by putting money into multiple financial vehicles. Most people have their money in “buy and hold” investments, and it does work, but are you willing to sit during the bad times?

If you go back to 2021 and 2022, you know what it’s like to sit through a buy-and-hold scenario when stocks are down.

For our clients, we follow four major themes or strategies in portfolios:

1. Core strategy, which is a theme that fundamentally focuses on good data that is in front of us. Recession talk led us to be a little defensive. The core strategy looks at what we think will happen in the short- and intermediate-term in the markets. We have 5 – 7 Exchange Traded Funds (ETFs) within this strategy alone. What this represents is, many times, thousands of stocks within the ETFs.
2. Tactical strategy, which is the theme that looks at what’s working right now. In this strategy, you’re looking at AI, technology, and large-cap stocks (like Amazon) that are running away with the market right now. This portion of the portfolio goes into these types of ETFs. If nothing is working, like a 2022 down market, we may decide to shift to lower risk assets, such as treasuries, to reduce risk and preserve capital.
3. Structured notes, which is something our clients love and is still rather unique. We work with banks to receive a “yield,” which is sort of like interest on a CD. The risk is low, and rates (at the time of this writing) are 8% – 10%. However, as interest rates come down, the yield will also come down. Structured notes are somewhat of a bond alternative. You need to have ultra-high net wealth to get these notes as an individual, but since we manage many clients, we can go to the bank with larger purchasing power.
4. Fixed income, which is bond ETFs and is actively managed. Since short-term bonds are going well, we’re investing in them a lot right now. Over time, we’ll move to medium- and long-term bond options as short-term starts to be impacted by interest rates.

You can secure your retirement with great diversification using these strategies. We believe that there is no singular perfect strategy for your money. Utilizing tried-and-true strategies when investing in the market to safeguard our client portfolios as much as possible.

Diversifying Outside of the Market

We have many clients who want to grow money with no downside or market risks. Our choice for diversifying outside of the market is a diversified portfolio of fixed annuities. The annuities are part of an insurance, so they work very well in helping us create a highly diversified portfolio.

Using an extreme example, let’s look at Warren Buffett.

Buffett recommends investing in insurance companies because they’re:

• Highly stable
• Regulated

When you work with a group that helps you diversify this way, it is a great way to spread your money out and see it all in one report.

You can see your money all on a report where nothing overlaps, and everything is working together to secure your retirement.

We had a meeting with someone who is not working with us yet, and their money was spread out in multiple areas, such as multiple 401(k)s and investment accounts.

The person was frustrated because their money was spread out everywhere, which made management much more difficult.

Diversifying your investments among different strategies is a great start to helping you get peace of mind in retirement.

Schedule a call with us if you want to talk to us about diversifying your retirement.