4 Easy Ways to Diversify Your Investments Insights From the Cornerstone Blog
Think globally. Domestic companies represent less than half of the global stock market. Incorporating international assets exposes investors to the entire global economy. Global growth is not always synchronized. When one region’s economy is struggling, another may exhibit robust growth. If you’re looking for low-risk investments, you will benefit from investing in internationally developed markets. A small allocation to emerging markets can improve most portfolios, as they tend to have a low correlation to the U.S. economy. Diversify by sector. Companies are divided into 11 sectors, including consumer discretionary, energy, basic materials, and technology. The sectors represent different parts of the economy and often move separately from each other. As a hypothetical example, the energy sector may perform poorly due to weak oil prices,
but the consumer discretionary sector might benefit as consumers spend less on gasoline and more on entertainment and home goods. Spread across asset classes. Based on risk tolerance, long-term investments should be allocated to different asset classes. Stocks, bonds, cash, real estate, and commodities are the most common liquid assets, but investors can also diversify into many types of physical assets. Within each asset class are subclasses, such as large-, mid-, and small-cap stocks. The various asset classes and subclasses often react differently and help to diversify an investment portfolio. Most investors can achieve optimal diversification using only stocks, bonds, and cash.
sometimes portfolios become overly complex. It isn’t necessary to own a little of everything. After achieving the objective of reducing correlation between investments, additional bells and whistles can increase expenses without benefiting the portfolio. There are assets that may have a negative correlation but consistently underperform and dilute returns. In a perfect world, investors would accurately pick the best performing asset and thus diversification would be unnecessary. That isn’t reality, though, and often when going for the grand slam, investors strike out, hence the need for diversification. The point is to diversify enough to reduce risk but not so much that it dilutes returns. For more from the Cornerstone Wealth Management Group blog, visit cornerstonewealthgroup.com/insights/blog .
Avoid over-diversification. With so many options available to investors,
A Simple Brine for Succulent Turkey
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2 large sprigs thyme
3/4 cup plus 2 tablespoons kosher salt
2 bay leaves
1 tablespoon black peppercorns
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3/4 cup sugar
1 carrot, peeled and diced
1/4 teaspoon crushed red pepper flakes 1/4 teaspoon fennel seeds (optional)
1 large onion, peeled and diced 1/4 cup celery, diced
DIRECTIONS 1. In a large stock pot, bring salt, sugar, and 4 cups water to a boil. Stir until all ingredients are dissolved. 2. Turn off heat and add remaining ingredients. Place brine in the fridge, uncovered, until cold. 3. Add 6 quarts cold water to brine. Add turkey and submerge completely. Brine chilled for up to 72 hours.
Answer on page 4
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Inspired by Bon Appétit magazine
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