Home Articles What does diversification mean, especially in retirement?

What does diversification mean, especially in retirement?

Diversification basically means that you are making sure that where you keep your money is mixed and varied to minimize your risk while maximizing your return.

For most people, when they are in their working years, diversification is mostly going to deal with your stocks and bond holdings. For example, we once worked with a client named Jared, who invested 100% of his 401(k) in the stock of the company he worked for.

The stock was riding high for a while and then whammy, the company couldn’t swallow a large acquisition, filed for bankruptcy, and down the drain went Jared’s 25 years of hard work and several hundred thousand dollars. That’s a very hard way to learn the principle of diversification.

When investing in stocks, you should have holdings in several companies spread across several industries and even several countries. That way, if one company goes bankrupt, or otherwise takes a big financial hit, you can make it up with gains from the others.

It is important to understand your personal risk tolerance before investing. Risk tolerance is basically the amount of risk you are comfortable taking on.

While factors such as age and income are going to contribute to your risk tolerance, your personal ability to handle swings in the market should be the main starting point in determining where you should put your money.

At Cardinal, we have a risk tolerance questionnaire you can take that scores you and puts you in a risk tolerance category, from converstative to moderate to aggressive. This will give you a good starting point to understanding your personal risk tolerance.

We have found that many people who come to us are either invested too risky or not risky enough. They are taking misguided advice from friends and family, got on the sideline when the market crashed, or are just too overwhelmed to make any real decisions.

Proper diversification protects you, your family, and your money from the whims of the market. At Cardinal, diversification is the number one investment principle we follow.


Listen To Finishing Well on Truth

Newest Live Episodes of Finishing Well are on The Truth Network

Finishing Well
Finishing Wellhttps://www.cardinalguide.com/finishing-well/
Retirement planning involves a lot more than just managing your money. This show is the complete guide to planning for and living in retirement, helping families finish well. Host Hans Scheil will discuss a new topic every week ranging from Social Security and Medicare to IRAs and taxes. Follow along each week by downloading the corresponding chapters below for free! New episodes air: Finishing Well Schedule on Truth Network
- Advertisment -

Recent Posts

Fighting for Joy as a Special Needs Parent

Describing how his world was turned upside down when his son was diagnosed with severe autism, Jason Hague talks about living with a broken...

The Ascension (Part 2 of 3)

When Jesus fulfilled His earthly mission, He left His followers to return to His Father. The disciples’ commission, though, was just beginning. How did they react to Christ’s departure? Find out when you join us on Truth For Life with Alistair Begg. List

How to Fight the Spiritual Battle: Using the Tools Provided by God

The old evangelist Billy Sunday said, “Temptation is the devil looking through the keyhole. Yielding is opening the door and inviting him in.” How...

Stepping Stones of the New Birth – Part A

When Jesus asked his disciples. "Who do men say that I, the Son of Man, am?" Peter responded "You are the Christ, the Son of the living God." Jesus promised Peter that upon the Rock of that confession He would build His church.

The truth of who Jesus is empowers common man to speak the message that opens the doors of heaven to sinners. Join us to learn strong principles for godly living and reach new heights in our faith as we work our way through Peter's epistles—writings which evangelize the lost and instruct the church. Pastor Skip Heitzig guides us through First and Second Peter in the series Rock Solid.

Revival in the Valley of Dry Bones, Part 1

To support this ministry financially, visit: https://www.oneplace.com/donate/222/29 While global warming advocates talk about the world getting hotter, the spiritual climate (especially in our country) seems...

Rescued From Misplaced Faith Part 1

Faith can destroy you if it is not based on the truth. Faith in the wrong place is worse than no faith at all, because it creates false confidence in empty promises. And when it comes to salvation, the last thing we need is false confidence. Is your fait

Don’t Ever Give Up, P02

Don't Ever Give Up, P02
%d bloggers like this: