Sponsored by The American College of Financial Services
If you’ve been in the profession long enough, you’ve likely encountered some variation of the saying, “Diversification means always having to say you’re sorry.”
The crux of this position is that by diversifying investments, you are mitigating risk, but at the expense of putting all your eggs into that year’s winning basket. When the markets fall, even diversified clients lose money (although not as much). But if markets rise, a diversified portfolio won’t perform as well as some high-flying stock sector.
However, clients who understand the purpose of their investment portfolios won’t be seeking an apology for diversification.
Advisors who think of themselves as “behavioral investment counselors” are prepared to have tough, but necessary, conversations with clients about risk, reward, and the meaning of investments.
To start incorporating behavioral finance into investment management, read the full post on The American College of Financial Services blog to learn more.