{"id":216,"date":"2016-10-04T10:23:01","date_gmt":"2016-10-04T17:23:01","guid":{"rendered":"https:\/\/mgfadvisory.ca\/news\/?p=216"},"modified":"2018-08-23T10:23:51","modified_gmt":"2018-08-23T17:23:51","slug":"the-4-key-benefits-of-diversifying-your-funds","status":"publish","type":"post","link":"https:\/\/mgfadvisory.ca\/news\/2016\/10\/04\/the-4-key-benefits-of-diversifying-your-funds\/","title":{"rendered":"The 4 Key Benefits of Diversifying Your Funds"},"content":{"rendered":"

One of the oldest and most trusted pieces of advice in the world of investing is to refrain from putting all your eggs in one basket. One of the true certainties of the global economy is that it\u2019s unpredictable to a degree. Sure, there are trends and indicators trained account managers follow in order to stay ahead of the curve, but there\u2019s always at least a small amount of risk if you want to see a big pay-off down the road.<\/p>\n

What is a Diversified Fund?<\/b><\/span><\/h3>\n

A diversified fund contains a range of funds. Let\u2019s say you and your fund manager believed strongly in a particular area\u00a0\u2013 you\u2019ve studied the trends over the short term and the long term and you\u2019re incredibly confident in a future pay-off.<\/span><\/p>\n

That\u2019s still no guarantee. You can purchase a\u00a0segregated fund\u00a0<\/a>to protect yourself from potential loss (which is still an added cost), every investment you make comes with some degree of risk. It can be a large risk or small, but if we could accurately predict the growth of every portfolio, then this would mean we could see into the future, and the worth of each portfolio would plummet.<\/span><\/p>\n

So why should you diversify your funds?<\/span><\/p>\n

1. Diminish Risk<\/b><\/span><\/h3>\n

If we can\u2019t see into the future to eliminate risk entirely, then the next best step is to diminish that risk. If your portfolio contains multiple funds\u00a0from different sectors, then a negative trend in one area won\u2019t affect another area. Sure, it\u2019s painful to watch a specific fund shrink, but it\u2019s a lot more painful when that\u2019s the only fund you possess.<\/span><\/p>\n

The opposite of diversified funds is focussed funds. When it comes to focussed or concentrated funds, let\u2019s say you\u2019re a strong believer in pharmaceuticals, so you focus your fund to match that belief. You might purchase multiple stocks, but if the entire sector experiences a sharp decline, then the damage to your portfolio will be immense.<\/span><\/p>\n

2. Improve Chances of Overall Growth<\/b><\/span><\/h3>\n

Dealing with the frustration of one declining fund\u00a0is a lot easier when you\u2019ve got others on the rise or maintaining consistency.<\/span><\/p>\n

Diversifying your funds doesn\u2019t mean you have to avoid potentially volatile markets\u00a0either \u2013 in fact, it means just the opposite. If you purchase a diverse range of funds, your quantity improves while your quality might not.<\/span><\/p>\n

Less risk, less reward, right? Buying into several areas increases your opportunity to experience growth somewhere, which will contribute to the growth of your overall portfolio.<\/span><\/p>\n

3. Global Absolute Return Strategies (GARS)<\/b><\/span><\/h3>\n

Think of GARS like the ultimate form of balance. Most investment portfolios only provide financial gain when markets grow, which is easy enough to understand. With global absolute return strategies, however, positive returns are ensured over the longterm even if certain areas experience decline.<\/span><\/p>\n

How? Through compensation from other funds.<\/span><\/p>\n

This means that if you\u2019ve diversified your portfolio enough, you\u2019ll experience growth regardless of market conditions. This is true even if it\u2019s simply one growing strategy picking up the slack for a fund\u00a0in decline.<\/span><\/p>\n

Absolute return strategies require time to kick in, but they\u2019re a great way to ensure your overall portfolio is hard at work to deliver net positive returns over the long haul.<\/span><\/p>\n

4. Peace of Mind<\/b><\/span><\/h3>\n

What\u2019s your favourite type of flower?<\/span><\/p>\n

Imagine planting a flower bed with a single type of seed in the early spring, only to discover far too late in the summer that this year\u2019s crop of roses isn\u2019t growing. There isn\u2019t enough time to find a different type of flower, so unfortunately you\u2019re left with nothing.<\/span><\/p>\n

Diversifying your funds is just like planting a flower garden. The more diverse your selection of seeds is, the more likely you are to experience growth in multiple areas, even if the one area you\u2019re really counting on fails to take root.<\/span><\/p>\n

So sit back, diversify, and watch your portfolio bloom!<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"One of the oldest and most trusted pieces of advice in the world of investing is to refrain from putting all your eggs in one basket. One of the true certainties of the global economy is that it\u2019s unpredictable to a degree. Sure, there are trends and indicators trained account managers follow in order to…

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