Diversification isn’t a magic bullet, but it is one of the best tools to protect your portfolio from unnecessary losses and volatility. The Darrow Wealth Insights blog covers diversification from several different angles: concentrated stock positions, asset classes, geography, company size, sectors, styles such as factors, and so on. As with anything in investing, consider your personal risk tolerance, time horizon, and circumstances.
What is a concentrated stock position? If one stock makes up more than 10% of your overall asset allocation, it’s probably too much. A diversified portfolio is the cornerstone of a risk-adjusted investment strategy. Since single stocks don’t move like the broader market, you’re exposed to much greater risk. Whether
As a startup or private company employee, you may have the option to participate in a tender offer from your employer. Accepting a tender offer means the company buys back some of your stock or options. While it won’t always make sense to participate, any opportunity for liquidity as a
Stocks and bonds differ in many aspects, including the risk and return investors can expect. Because of these differences, stocks and bonds accomplish different things in an asset allocation. When you own a stock, you’re buying a piece of equity ownership in the company. With bonds, you’re buying the issuer’s
Although past performance is not indicative of future results, history can be a helpful lens to view bond performance during past recessions and bouts of volatility. Swings in the financial markets also highlight the benefits—and limitations—of diversification. During times of economic, financial, and political uncertainty, investors often wonder where to
The Instacart IPO is on hold…again. What should employees with stock options do when their employer’s IPO stalls? In truth, best practices around an IPO are sometimes skewed towards what not to do. If you have stock or options from a company that’s about to go public, there may be
The Federal Reserve is going to be raising interest rates (via the target Federal Funds rate). This is likely to happen next month. Rising interest rates affect the stock and bond market in different ways. Interest rates don’t have a uniform impact on sectors within each broad asset class, either.
What happens to stock options if a company goes public without an IPO? A Direct Public Offering (DPO) or direct listing is a way for a company to list itself on a public stock exchange without the traditional Initial Public Offering (IPO) process. If you have employer stock options and
How do bonds work and why buy them in your investment accounts? There are several benefits of investing in bonds. Most notably, bonds provide investors with income, diversification from stocks, and stability compared to riskier asset classes. There’s a lot to know about bonds, but here are the bond basics
Amidst the vast uncertainty in the markets right now, it’s more important than ever for investors to understand the benefits—and limitations—of diversification. Having the right investment mix for your situation is critical in good times in the financial markets and during downturns. While you can’t control the ups and downs
Setting your asset allocation is like drafting architectural plans when building a home; it provides a map to guide the construction of your investment portfolio. Developing an asset allocation is a multi-step process, which is challenging for many investors, and for good reason. A Google search for the term “how