Why Diversification Rarely Wins, but Rarely Loses

Diversification

In my last post, For S&Pete’s Sake: How to Get Your Clients to Break Up with This Index, I discussed the reasons why the S&P 500 Index is often a poor proxy for success when comparing how clients are progressing toward their goals. The reasons center around the concentrated nature of the index and capitalization methodology, which leads to a momentum strategy without an exit plan.

Kevin Barr, head of our Investment Management Unit, recently wrote a piece, Diversification: It’s Not Always Easy to Do the Right Thing, which takes the next logical step in determining success. He discusses how diversification rarely wins in any one given year, but that it may shine through over time. Even with the recent struggles that diversified portfolios have had versus the S&P 500, a more balanced approach has outperformed in the long run.

I invite you to share Kevin’s commentary with your clients. It provides excellent support for any conversation you need to have with your clients on the topic of passive investing and diversification.

Share Button
John Frownfelter

John Frownfelter

John Frownfelter is the investments contributor for Practically Speaking and the managing director of investment solutions within the SEI Advisor Network.

Learn More About John Frownfelter

Subscribe

Categories

Follow Us on Facebook

Recent Tweets