Money Read Time: 4 min

Overlooked ways to add diversity to your portfolio

Even though investing in the stock market is a key component of successful portfolios, only about half of American families own stock,1 but this has the potential to change. New technology, like mobile trading apps, is giving more people access to market opportunities by lowering the bar of entry. But, even if you’re new to investing, you’ve probably heard this advice: build a diverse portfolio.

What is Portfolio Diversity?

Traditionally, a diverse portfolio means a mix of stocks and bonds. Stocks can add robust growth to your investment fund, but this growth comes with risk. To mitigate the risk, bonds add stability.

But investment strategies continually evolve. As mentioned, technology is opening investment access to more people than ever before. At the same time, there are long-standing financial tools that often get overlooked. Together, these can help you build a varied financial plan and build security for the long term — and add diversity beyond basic stocks and bonds. Working with a financial professional can help you tap into the new tools, as well as benefit from some of the lesser-known strategies.

Democratized investment opportunities

New investment opportunities like fractional stocks are also expanding the reach of the average investor.2 Fractional stocks allow you to buy a portion of a share — or portions of shares from different companies — when a full share is out of your price range. Fractional shares can be a powerful tool for adding diversity to your portfolio, making it easier to distribute your investment over many stocks, rather than weighing too heavily into one company.

Insurance options for your life today

The goal of portfolio diversification is protection: keeping your investments safe from downturns and other unexpected events. But, what if the unexpected is a personal emergency that threatens your income? Many people in their 20s are surprised to learn that approximately one in four people will become unable to work for a substantial length of time due to illness or injury. In a crisis, disability insurance can allow you to keep your savings and investment funds intact, instead of draining them while you’re out of work. If you’re in a committed relationship, a spousal benefit policy can protect your partner, too.

Whole Life Insurance adds diversity

Another tool for adding diversity is whole life insurance, especially after you have children. First and foremost, a whole life policy gives your loved ones a financial safety net. Plus, as you pay your whole life premiums, the cash accrues as an asset, and you can use this asset to finance big goals like your child’s college education or starting your own business, making it an asset that is uncorrelated with the ups and downs of the market. In addition to this cash value, whole life may even be able to help you offset unexpected expenses like long term health care or other costs you may face in retirement, through available features and riders.

Annuities provide income in retirement

Annuities are another tool that bring rewards in the long run. They’re also known as “insurance for retirement.”3 People pay a financial institution a single lump sum or make several payments over time for annuities depending on the type of annuity. Once the annuitization phase is reached, annuities can provide guaranteed income in retirement, and they may come with certain tax benefits, too.

Whether you’re new to investing or continuing to grow your existing portfolio, it's important to stay up to date on the variety of vehicles that can protect your assets. More and more, people have greater opportunities to build wealth through innovative new technology, as well as established, but lesser-known strategies. A financial professional can help you make the best plan to protect yourself and your loved ones, save money, and invest for your long-term goals.


SOURCES:

1 What Percentage of Americans Own Stock? USAfacts.org, March 2, 2021

2 Shares by the slice: Fractional Investing Sparks a Stock Market Stampede, Washington Post, July 10, 2020

3 Annuities: Insurance for Retirement, Investopedia, May 20, 2021

DISCLAIMERS:

All investments contain risk and may lose value. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Brought to you by The Guardian Network © 2021, 2023. The Guardian Life Insurance Company of America®, New York, NY

2023-1644373 Exp. 11/2025

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