When it comes to investing, there’s one principle that holds true across time and market conditions: don’t put all your eggs in one basket. That’s the basic idea behind diversification and an essential part of building a resilient portfolio.
At Alaska Wealth Advisors, diversification is one of the core strategies we use to help protect and grow our clients’ wealth. But what does diversification really mean, and why does it matter so much?
Understanding Diversification
Diversification means spreading your investments across a range of asset classes, like stocks, bonds, and alternatives. So that your portfolio isn’t overly reliant on the success or failure of any single investment. It also means diversifying within those asset classes: holding different sectors, geographies, and company sizes, for example. The goal is to reduce risk and increase the likelihood of more stable returns over time.
Why It Matters
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No one can predict with certainty which part of the market will outperform from year to year. In some years, U.S. stocks may lead. In others, international stocks or bonds might shine. The Callan Periodic Table of Investment Returns shows annual returns for various asset classes from highest to lowest each year, highlighting the unpredictability of market leaders.
By maintaining a diversified portfolio, you stay positioned to benefit from what’s working without needing to guess what will work next.
Just as important, diversification helps cushion your portfolio during periods of market stress. If one area of the market struggles, other parts of your portfolio can help offset the losses. It’s not about eliminating risk entirely, it’s about managing it wisely.
What It Looks Like in Practice
Our portfolios are built to support short-, mid-, and long-term goals. That includes strategic allocations to stocks for growth, bonds for stability and income, and alternatives that can respond to inflation and market shifts. Each piece serves a purpose, and together they help support your financial plan, whatever the market may bring.
We also monitor and rebalance portfolios quarterly, adjusting exposures to keep risk in check and capture opportunities as they arise.
Diversification isn’t just a popular investing term, it’s a disciplined approach rooted in decades of academic research and real-world experience. It helps create a smoother investment journey and supports better decision-making when markets are uncertain.
If you’d like to learn more about how your portfolio is diversified, or if life changes suggest it’s time for a fresh look, please reach out to your advisory team. We’re here to ensure your investments continue to align with your goals.
Stan Moiseev
Private Wealth Investment Analyst
The opinions expressed are those of Alaska Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass.
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request.
¹ Source: Callan LLC. www.callan.com/periodic-table
