Diversifying your portfolio and allocating assets across fundamental asset classes
Diversification as a core investment principle has taken a back seat to a focus on concentrated growth over the past several years. While it’s true that the market rewarded high conviction highflyer equities over that time – a shaky 2023 marked by volatility, high valuations, rising rates, sticky inflation, geopolitical uncertainty and a cautious outlook to 2024 – the current environment is indicating that this strategy might be running its course.
So, as equities struggle, bond yields rise and alternatives begin to assert their value as strong options, we are seeing clear indicators that the need for intelligent diversification across multiple classes is paramount—making the role of asset allocation and asset management a much more important part of the current and upcoming market cycle.
Portfolio Diversification in Today’s Environment
Diversification as a core investment principle has taken a back seat to a focus on concentrated growth over the past several years.
Risk Mitigation: Diversifying across both securities and asset classes can help reduce the risk of significant losses. When one asset class underperforms, others may provide stability, helping to balance your portfolio’s overall risk.
Steady Returns: By holding a mix of assets, investors can aim for a more consistent return over the long term, as different asset classes perform well in varying market conditions.
Capital Preservation: Diversification can help preserve capital, especially during market downturns. It allows you to ride out volatile periods without making hasty decisions.
Increased Flexibility: A diversified portfolio provides the flexibility to adapt to changing market conditions. It allows for rebalancing and reallocating assets as needed.
Peace of Mind: Knowing that your investments are spread across different areas can offer peace of mind, reducing the stress associated with concentrated holdings.
But all of these make up just one piece of the portfolio puzzle. In the next section we’ll go over how some specific asset management strategies help to maximize the positive impact of diversification strategies.
The Importance of Specialized Asset Management in Diversification
At the highest level, asset allocation and the active management of a range of asset classes are the guiding forces for value-added diversification. It not only optimizes the value drivers of diversification; it goes further by maintaining a consistent strategic approach to that diversification mix, in addition to providing key supplemental benefits. Here are a few of the primary drivers of value:
- Asset Allocation: A key component of smart asset management is determining the right asset allocation for your goals and risk tolerance. This involves spreading your investments across various asset classes, such as stocks, bonds, real estate, and alternative investments. The right mix can vary based on your specific circumstances and will change over time.
- Continuous Monitoring: The financial markets are dynamic, and the ideal asset allocation can shift over time. Regularly monitoring your portfolio allows you to rebalance and ensure your investments align with your original strategy. This helps to capture gains from outperforming assets and protect your portfolio during market downturns.
- Goal Alignment: Asset management helps align your investments with your financial goals. Whether you’re saving for retirement, a major purchase, or just building wealth, a well-managed portfolio can keep you on track.
- Tax Efficiency: Smart asset management also involves considering tax implications. Strategies such as tax-loss harvesting can help you minimize tax liabilities, leaving more of your returns in your pocket.
- Professional Guidance: Financial advisors and asset management professionals help navigate portfolio complexities. Experienced professionals can provide valuable insights, access to diversified investment products, and tailored solutions to meet your financial objectives.
The NBCS Asset Management + Diversification Solutions
A division of NBC Securities, NBCS Asset Management was built for this exact type of environment, with a wide range of equity, bond and alternative strategies designed to provide investors with a host of options based on their preferences, goals and needs—and guided by the dual mandate to both perform and protect.
Our asset management SMA strategies offer professional management and active allocation strategies across asset classes and portfolio models. They are flexible and customizable asset management strategies and can be broken down across four categories: Foundational Core Portfolios, Satellite & Core+ Portfolios, Strategic Models and Fully Custom Portfolios.
Foundational Core
Portfolios
A strategic mix of asset managers across equity and fixed income SMAs portfolios:
Equity Income – Fixed Income – Focus Growth – Core Equity – Core Equity Plus – High Dividend Yield
Strategic Model Portfolios
Our five specialized models provide targeted focus on active asset allocation for conservative to growth investors.
Satellite & Core+
Offer a range of options to balance equity and corporate, government and municipal fixed income portfolios in these flexible, professionally managed SMA solutions.
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Custom Portfolios
Offer advisors and investors the opportunity to customize portfolios across stocks, bonds and ETFs.
Putting Your Portfolio Building Blocks In Place With NBCS
NBCS Asset Management’s experienced team of financial professionals—both advisors and portfolio managers—are here to map our in-house strategies with investor preferences, aiming to find the right diversification mix to meet long-term financial objectives.
As the macro environment continues to signal uncertainty, proper diversification and the right partner to carry out your asset management strategy is paramount—and NBCS Asset Management is equipped with the portfolio building blocks needed to help protect portfolios while aiming to outperform.
