Why Build a Diversified Portfolio?
Portfolio diversification is a counterintuitive concept. It implies that some investments will outperform others, which begs the question of whether it is preferable to focus only on better-performing assets.
As portfolio managers, we seek to identify assets and asset classes that routinely outperform market indices, but even our considerable knowledge and experience cannot protect against unforeseeable future events. Stuff happens! Natural disasters, geopolitics, management or labor turmoil, disruptive technology, and a host of other forces can impact the financial performance of a stock, industry, or sector with little or no warning.
Some investors believe they can diversify by holding multiple funds, but on closer analysis, their asset blends might be concentrated in the one or two sectors with which they are most familiar. We analyze the underlying security holdings of funds and ETFs to ensure our clients’ portfolios are not unwittingly duplicating the same exposures.
We build a diversified portfolio to distribute your investment capital with a goal toward allocating resources into investments that will behave differently in response to future events. A well-diversified portfolio thus reduces your investment risks and your exposure to unforeseeable volatility while protecting your returns.
Bespoke Portfolio Allocation by the 6th Avenue Team
The 6th Avenue Team excels at building a customized diversified portfolio that will meet your unique situation and investment goals. Our initial intake meeting and follow-up consultations first identify for us the asset allocation that satisfies your long-term goals. We consider whether you are a conservative or aggressive investor, your proximity to retirement, your family’s specific needs and wants, and the legacy that you seek to create.
We then select a variety of equities, bonds, exchange-traded funds (ETFs), and other assets that respond to your desired investment outcomes. We explain our recommendations and how the right blend of those assets and asset classes should give you the best opportunities to meet your goals.
The 6th Avenue Team’s diversified portfolio allocations do not end with these initial recommendations. If asset values change and we perceive that your portfolio has become too weighted in particular assets or sectors, we will rebalance the mix of assets to keep your portfolio balanced and pointed at your goals.
The Multiple Layers of Portfolio Diversification
One structure that we utilize to accomplish this is to divide your portfolio between core and tactical holdings. Core holdings, which often comprise the larger component of a diversified portfolio, frequently include several different exchange traded funds (ETFs) that provide exposure to multiple industry sectors with better liquidity to enter and exit investments in volatile markets. Tactical holdings are assets that our research indicates will respond to anticipated market or economic opportunities. This is where we generate Alpha.
Portfolio Diversification and Tax-Efficiency
Even a great portfolio will lose its advantages if its gains are eroded by taxes. The 6th Avenue Team incorporates tax efficient strategies into every portfolio to allow you to retain the greatest possible portion of your returns. We constantly seek to minimize your tax burdens while aiming for attractive after-tax returns.
Contact the 6th Avenue Team
Please contact the 6th Avenue Team to schedule an intake meeting with one of our experienced investment advisors and learn more about the value of diversification for long-term investment success.
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