The Diversification Definition

Sometimes we hear something so often, we assume that it’s true. That’s marketing, right?

Think on this. Ever hear ‘Buy more, save more?’ Ridiculous! The more you buy, the more you spend, not save. I can think of many more examples like this.

So how does this apply to diversity? If I ask nine out of 10 people what diversification means, they will answer that it means having their money invested in different places in the stock market. Sounds right, no? You can read this in the papers from brokers, trusted financial professionals like CPA’s… Wait a minute, is this really true, or are we being marketed to?

Let’s be more open for a minute. Where can we invest out free cash so that it is diversified? Obviously, there’s the market, but do we have other choices? What about real estate as a rental property or to invest in and sell? How about collectibles like antiques, cars, and coins? Can you use cash to purchase a business to invest in? What about cash generating insurance products? Annuities?  GICs? Bonds? Individual stocks? 

It seems that we have many places we can invest out free cash to create wealth or income.

So why do nine out of 10 of us refer to just the market when discussing diversity? You know, large cap, small cap, international, dog cap? Perhaps we have been marketed to, and so heavily and so often that we have lost sight of the many opportunities available in this country to create wealth.

Please don’t get me wrong, there are places where the market definition of diversity is an appropriate lens to look through for investing options, such as a company sponsored retirement plan, but it is not the only place one can invest in and create wealth.

In fact, here is a strategy I use for my personal clients. It is necessary to have several, or all of the above types of assets, to have a stable, healthy retirement at any age. One asset will not guarantee your financial security. Flexibility, which is I define here as having many asset options to draw from for cash flow, is key and necessary to guarantee your financial future.

*All investment advice given by Jeanne Brutman is just opinion. Please consult with your financial professional for a more thorough discussion of what is appropriate for you.