Volatility Leading Advisors to Rethink Diversification
65%: Advisors looking for new ways to diversify client portfolios
Despite the recent trends upward for equities, volatility in stock markets around the world and economic uncertainty have left both clients and their advisors fearful of what lies ahead. To make matters worse, bond yields are approaching record lows, not offering the same levels of income investors have become accustomed to. In response, advisors are looking into different areas of the investment universe to help clients achieve their goals.
In Financial Advisor Magazine's most recent Alternative Investments Survey, 65% of advisors reported looking outside of their typical investment repertoire for new ways to achieve diversification. Alternative investments seek to offer opportunities for low correlation and minimal volatility, the building blocks of portfolio diversification.
Source: Financial Advisor Magazine, Alternative Investments Survey 2012
Although incorporating alternative investments into a portfolio may lower correlation and improve diversification, utilizing them involves substantial risk and in some cases, losses which exceed the principal amount invested. Some alternative investments have experienced periods of extreme volatility and may not be suitable for all investors.
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