Don't just diversify your assets, diversify your ideas

ALTERNATIVES

clock • 5 min read

Brian Jacobsen, portfolio strategist at Wells Fargo Asset Management, explains why it is time to reexamine the ideas your clients' portfolios are exposed to.

Traditional asset allocation and diversification involves prudently spreading your financial capital across various securities. Less appreciated is the need to diversify across various ideas. When prices of assets move together, it is said that correlations go to one. The idea of diversifying across asset classes is that they will not be perfectly correlated. That helps lower risk without necessarily sacrificing a lot of expected return. However, since the global financial crisis, our traditional experience of what does and does not correlate has shifted. Traditional asset allocation ...

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