For individuals with significant assets, building a portfolio that stands the test of time is essential. Market fluctuations, economic cycles and personal financial needs all require careful planning.
The key? Diversification.
A well-diversified portfolio balances risk and reward, ensuring long-term stability.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The importance of diversification
Diversification is about spreading your investments across different asset classes to reduce risk.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
Instead of relying on a single stock or industry, diversification ensures downturns in one sector won’t jeopardize your financial future.
Asset allocation: The foundation of a balanced portfolio
A strong portfolio includes a mix of:
- Stocks. Growth potential but with higher volatility
- Bonds. Stability and predictable income
- Real estate. A hedge against inflation and a source of passive income
- Alternative investments. Private equity, commodities and hedge funds can offer uncorrelated returns
- Cash & cash equivalents. Liquidity for emergencies and opportunities
Although there are a lot of reasons why a person might choose to invest, the most common (including my own main purpose of investing) is to accumulate enough money to retire with comfort.
Many people also invest to have the confidence they’ll be able to maintain a certain standard of living and knock off some bucket list items. Life is not about money, yet it is a tool to make the things we want out of our lives a reality.
Managing risk: Strategies for stability
In addition to diversifying your investments by including a mix of different asset classes, you should strive to spread your money within those asset classes into different segments of the market. For example:
- Geographical diversification. Investing in different regions can mitigate risks tied to one country’s economy
- Industry diversification. Avoiding overconcentration in one sector
- Investment style diversification. Blending growth and value stocks for balance
Rebalancing your portfolio
Market changes can shift your asset allocation over time. Regular rebalancing ensures you stay on track with your goals.
A very common question I hear is, “Joe, how often should I be rebalancing or even reallocating my portfolio?” The answer to this question is not the same for everybody.
I’ll use myself as an example. I’m over a decade away from retirement. (If I’m being honest with myself, I’m probably closer to two decades away.) As such, I am rebalancing my portfolio once a year, maybe every nine months.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
Someone in their 20s might only rebalance every other year, while someone within a few years of retirement is likely rebalancing every six months or even more often than that.
An individual in retirement, especially if they are taking distributions from their portfolio, is probably rebalancing on a quarterly, if not monthly, basis.
The role of professional guidance
A financial adviser can help tailor a strategy specific to your goals, risk tolerance and timeline. The right plan will evolve with you, ensuring long-term financial security.
Of all the possible reasons that a financial adviser might choose to do what they do, I get the most satisfaction when I’m able to show someone a path that leads them to achieving their retirement goals and dreams — especially when they didn’t feel it was a possibility before we met. I don’t have to do what I do; I feel as though I get to!
Final thoughts
Are you confident your portfolio is positioned for long-term stability? If not, now is the perfect time to evaluate and adjust.
Whether you're planning for retirement, preserving wealth for the next generation or simply seeking peace of mind, diversification is the cornerstone of a successful investment strategy.
At Rooted Wealth Advisors, we understand no two investors are alike. If you’d like to build a portfolio that reflects your values, goals and vision for the future, you can reach out to us on our website.
Joseph (Joe) Mateja is an Investment Adviser with Rooted Wealth Advisors, Inc. The article above is not tax or legal advice. Consult with a qualified professional before implementing any strategies discussed.
Investing in securities involves risks, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.
Related Content
- Tax Diversification: Smart Ways to Help Preserve Your Nest Egg
- Why Private Markets Are a Diversification Superpower
- How to Use DSTs and 1031 Exchanges for Diversification
-
AI’s Rapid Rise Sparks New Cyber ThreatsThe Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
I Got Laid Off at 59 with an $800,000 401(k). What Are My Options?If you've also recently been laid off, don't panic! Here's expert advice on what to do.
-
I Got Laid Off at 59 with an $800,000 401(k). What Are My Options?
If you've also recently been laid off, don't panic! Here's expert advice on what to do.
-
Does Morningstar’s Retirement Withdrawal Advice Work for Investors?The financial services firm’s guidance takes a different path than the traditional 4%-a-year strategy. Researchers compare the two to see how they stack up.
-
Social Security's First Beneficiary Lived to Be 100: Will You?Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational ShiftsAs the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.
-
Stock Market Today: Another Quarter, More Mixed Price Action"Up and to the right" remains the general trend despite persistent uncertainty around critical policy issues.
-
Over 100k Medicare Accounts Breached in Latest Hack: Was Yours One?Letters are going out to 103,000 Medicare beneficiaries who may have been impacted. Here's how to protect your identity and benefits.
-
10 Best Free (or Cheap) Online Classes for Seniors and RetireesCheck out these free or affordable online classes for retirees and grab some extra smarts.
