Topic 3 – Benefits of Diversification in Your Portfolio

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So we see that using asset allocation can provide additional risk to our retirement income planning that’s not necessary. If we apply the income allocation rules, we diversify our portfolio, and we choose different products for different purposes. One for income, and one for growth. As we see in this slide are benefits of diversification in the portfolio, not putting all our eggs in one basket, we reduce our risk. Certainly one of the number one concerns of retirees is reducing risk. Secondly, we keep capital preserved. Our amount of assets that we don’t have to draw out of can grow. Now they can go up and down with market performance, but possibly using more of a defensive managed portfolio, in times when markets are negative, will help us to avoid the major drawdowns of market performance. We also see by reducing our risk, and number one, we have the ability to hedge our portfolio, which gives us an opportunity in our growth portfolio to perhaps take a little bit more risk. Remember risk and reward our traveling companions. The more risk we’re willing to take, the more potential return on our investments we could see.

And finally, number four diversification will help us to achieve our long-term growth objectives of our bucket of money, that’s subject only to the risk that we determined is necessary for our objectives for that later money in retirement. I often say this, income and retirement comes in different phases. You have the period of time when you first retire, it’s your Gogo years. You’re going to spend a lot more money in your Gogo years. Then you move into that second 10 years, maybe at about age 75, and you start slowing down a little bit. You don’t travel as much. You don’t take those trips around the world anymore. Stay at home a little bit more and maybe work on the home. You’ve slowed down in the next 10 years. But the final 10 years that 85 to question Mark are, are no-go years, and that’s the time when healthcare can possibly slip in and steal a little bit of our resources that are planned for legacy. So we need to set up our income in separate dollars than what our growth assets are set up for future use, because we’re going to use those growth assets at different times and different amounts.

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