AlphaSource Investment Counsel
The Value of True Diversification
"More efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations"
Dr. Harry M. Markowitz
1990 Nobel Prize Winning Economist
Father of Modern Portfolio Theory
How Will Your Portfolio Respond to Market Stress? Modern Portfolio Theory tells us that holding a well-diversified "basket" of investments can be one of the best ways for individual investors to reduce risk for a given level of performance. But a portfolio comprised of only stocks, bonds and cash may not be enough to provide true diversification.
Non-Traditional Investments and Diversification
How do you find assets that are not correlated with a traditional portfolio of stocks and bonds? Non-traditional investments, including global real estate, managed futures, commodities and long/short products, are options that many sophisticated institutional investors have been using. Some of these non-traditional investments have exhibited strong historical performance against the broader markets. But most importantly, some have proven to have consistently low correlations with the broader market. It is this low correlation that potentially makes non-traditional investments an attractive consideration to complement traditional portfolios.*
Integrating a Broader Range Investments Into Your Portfolio
The diversification benefits of some non-traditional investments means that dedicating a portion of your overall portfolio to non-traditional investments can result in a portfolio with the potential for improved performance in both bull and bear markets.
Future
"Moving forward, we expect to see Alpha being generated from an even broader range of sources, including commodities, real assets, and structured products." McKinsey & Company
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