EBI – Principle #2: Diversify Your Asset Classes
About This Episode
The principles of evidence-based investing provide you with a framework to empower you as an investor to be able to move confidently forward towards financial security. Last week we covered why it’s important to invest in asset classes, rather than relying on market predictions and picking stocks. Today, we’re focusing on the second principle, diversifying your asset classes.
Research suggests that by and large Canadians are not diversifying the way they should be. As an empowered investor, it’s critical to understand not only the importance of diversification but why you should consider this strategy and use it within your investment approach.
On this episode, Ruben and I talk about what proper diversification looks like in your investment portfolio, the problem with home bias, the impact of poor diversification, why it feels so hard to maintain a diversified portfolio, the ongoing maintenance needed for a diversified approach, and so much more!
Thank you for listening!
- How diversifying your asset classes fits into evidence-based investing (1:44)
- What does diversification mean? (3:50)
- The types of asset classes that you should think about including in your portfolio (4:16)
- What proper diversification looks like in your investment portfolio (4:56)
- How stories can negatively impact your portfolio (5:47)
- An example of redundancy causing poor diversification in a portfolio (6:32)
- What a 2017 Vanguard study tells us about whether Canadians are properly diversified (7:31)
- The problem with a home bias (8:09)
- Why the attraction towards dividend investing can result in a poorly diversified portfolio (10:29)
- The Nobel Prize winning economist whose research showed that diversifying your assets results in a better return for a lower risk (12:48)
- How can you incorporate the concept of correlation to improve your portfolio? (14:00)
- The impact of a lack of diversification during the Great Depression (16:03)
- How the concept of diversification catalyzed the evolution of the investment industry since the 50s (17:08)
- Why it feels so hard to maintain a diversified portfolio (18:39)
- What history shows us about the discipline required maintain your portfolio during difficult periods (19:22)
- Rebalancing your investments to keep your portfolio in balance (22:27)
- The ongoing maintenance needed for a diversified approach (23:30)
- Choosing the appropriate type of rebalancing based on your financial goals (24:58)
- Advice from a 15th century banker (26:04)
- What you can do right now to assess and improve your portfolio (27:16)
- And much more!
Thanks for Listening!
In this episode, Marcelo, Ruben and Keith talk about how the Delta variant has impacted investors so far, what we’ve seen in the bond and stock markets, the pitfalls you need to avoid as an investor, why your investment philosophy is your biggest asset, and so much more!
On this episode, Marcelo, Lawrence and Keith discuss how robo-advisors work, the opportunities that robo-advisors have created for Canadian investors, the advantages and risks of using a robo-advisor, and so much more!
With increasing global connectedness, the world today is smaller than it’s ever been. Countries are coming together to share information in a global trend towards greater transparency and with that, undeclared assets are much more likely to be discovered. So if you’ve found yourself in a situation with undeclared assets, what can you do to get on the right side of things?