Diversification: How Much is Enough?
Diversification has always been important. But do your portfolios go far enough to handle today’s unusual market conditions?
The good times that have recently prevailed in the markets make it easy to forget that the investment landscape today remains very unusual.
The so-called “new normal” of low rates and low growth appears to be changing, yet the Fed still has years of stimulus to unwind. Dramatic changes in the tax code have implications that won’t be clear for months, if not years. Volatility, unusually low for months, has now surged dramatically. And the global economy is more intertwined than ever.
Though this has generally been positive for markets, it’s a scenario not seen in our lifetime. Change could erupt in ways not easily anticipated – by investors or traditional diversification schemes.
So whether the goal is to improve return or manage risk, it can make sense now to consider strategies that can add a deeper level of diversification – focused on specific investor objectives.
Objective: Manage Volatility
Many investors are concerned about continued volatility in 2018, given the potential for higher inflation, but don’t want to sacrifice potential gains by moving away from stocks.
See why volatility could come and go this year – highlighting the potential value of low-volatility stock strategies.
Objective: Diversify Income Streams
Dividend stocks can provide a useful complement to fixed income, but they come with equity risks. Global infrastructure investments offer the prospect of income derived from relatively predictable user revenues, with returns that may not closely correlate to the stock market in general.
Objective: Expand Sources of Return
Traditional growth managers can miss rewarding opportunities by focusing on rapidly expanding companies rather than those with longer-term horizons for success. One strategy: highlight fundamental analysis to find growth companies that are undervalued now.
IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s web page for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision.
Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus for this and other information. Read it carefully.
FINANCIAL ADVISORS: Please note that not all share classes may be available for sale at your firm. Please call the Legg Mason Sales Desk 1-800-822-5544 or your Legg Mason Sales contact for more information.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility.
Equity securities are subject to price fluctuation and possible loss of principal.
Diversification does not guarantee a profit or protect against a loss.
Dividends may fluctuate and a company may reduce or eliminate its dividend at any time.
Companies in the infrastructure industry may be subject to a variety of factors that could adversely affect their business or operations, including high interest costs in connection with capital construction programs, high degrees of leverage, costs associated with governmental, environmental and other regulations, the effects of economic slowdowns, increased competition from other providers of services, uncertainties concerning costs, the level of government spending on infrastructure projects, and other factors.
All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks associated with hedge funds, alternative investments and other risks, performance and other important information. Review this information carefully before you make any investment decision.