Navigating market volatility is nothing new, as nearly a century of market data clearly demonstrates.
Building Blocks of a Diversified Portfolio
When investors discuss asset classes, they’re referring to the different types of investments that respond uniquely in various market conditions. Spreading capital across these groups (known as diversification) can help reduce portfolio risk.
Let’s take a quick look at the six main asset classes:
Equities (Stocks):
Stocks represent ownership in a company and offer growth potential, but they also come with volatility and the risk of loss.
Fixed Income (Bonds):
Bonds are loans to corporations or governments that pay interest and return principal at maturity, offering lower volatility than stocks but carrying credit risk.
Cash & Cash Equivalents:
Liquid assets like checking accounts, money market funds and short-term CDs or T-bills are useful for near-term needs, rather than long-term growth.
Real Estate:
Direct property and Real Estate Investment Trust (REIT) ownership provides income, potential tax advantages and diversification, but may be less liquid than other investments.
Alternatives:
Alternatives are niche investments, such as private equity, hedge funds or crypto and operate outside public markets, typically with higher complexity and lower liquidity.
Derivatives:
Derivatives are contracts tied to underlying assets like options or futures, and are used for hedging, income or speculation, but are best reserved for specific situations.
Diversification across asset classes is a cornerstone of prudent long-term investing, helping to balance risk and return through changing market cycles. While each asset type carries its own risks, combining them thoughtfully can strengthen portfolio resilience.
Get in touch
We believe true wealth management goes beyond numbers– it’s built on trust, transparency and a deep understanding of your goals. As fiduciaries, we’re committed to putting your best interests first, always.
Whether you’re navigating life transitions, planning for future generations or seeking a partner to help you make confident financial decisions, we’re here to help.
To learn more about our personalized wealth and asset management services, please contact:
Jason R. Clark, CFA
Principal, Portfolio Manager
949.424.1013
jclark@kovitz.com
TPS Wealth Foundations - Building Blocks of a Diversified Portfolio
Kovitz Investment Group Partners, LLC (“Kovitz”) is an investment adviser registered with the Securities and Exchange Commission. This report should only be considered as a tool in any investment decision and should not be used by itself to make investment decisions. Opinions expressed are only our current opinions or our opinions on the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.
