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August 11, 2002 at 08:00 PM
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Many Americans have been living in a financial fantasy. During the last decade, extraordinary stock market gains had become almost commonplace.
However, accounting irregularities, corporate improprieties, global political instabilities, and a declining stock market have caused even the most intrepid investors to question their equity investments.
In fact, one in five investors is completely unsure of the most appropriate investment for the current economic environment, according to a new study commissioned by Northwestern Mutual Financial Network and conducted by Harris Interactive in June 2002.
In view of this, what advice can you, as a trusted advisor, provide to your clients?
The secret of sound investing can be said in one word: “Diversification.” You may not be able to predict with any certainty the markets next moves, but with diversification achieved through proper asset allocation, you can enhance returns while limiting the downside damage that market swings do to client portfolios.
Remember, no single investment performs well under all economic or markets conditions. By spreading your clients investments among growth, income and fixed assets, you can potentially reduce the impact that one poor performer may have on the overall portfolio.
The goal of any asset allocation strategy is to provide the highest expected return for a given level of risk–in view of your clients goals, time frame and risk tolerance. But dont stop there.
According to the Harris Interactive study, nearly one-third of Americans feel they have an increased need for advice from a financial professional, yet only half of these have spoken to an advisor.
