top of page

Importance of a Diversified Portfolio

Many investors are missing exempt market products from their portfolios. Well balanced, risk sensitive exempt market investments allow investors to enhance their existing stock/bond portfolios and an opportunity to enhance returns.

Even with a limited view of diversification with stocks and bonds, it’s surprising how narrowly focused some portfolios can become. Many portfolios contain many different equities – typically in Calgary they are all drawn from the oil and gas sector – because that’s an area of expertise and therefore a comfort zone for people. But the ability to pick excellent energy stocks doesn’t shield investors from the notorious volatility of that entire sector in periods when supply exceeds demand. Others seek diversification in an array of mutual funds.

But while each of these funds may be individually diversified to a certain degree, as a group they frequently show alarming overlap in their holdings. They may each hold 20 different stocks but several of them may hold 12 companies in common, creating dangerous overlap in the client’s portfolio and costing significantly more in fees than necessary.

Real estate investments can provide much needed diversification

Real Estate is the cornerstone of much of the world’s wealth. It has a very low correlation with equity markets and therefore tends to remain stable when markets are not. This is because real estate is moved by different drivers. Shelter is an indispensable human need, whether economies are up or down, and this is true for both individuals and businesses. So real estate tends to be insulated from market volatility. Like bonds, real estate can provide long-term security of capital.

Recent Capstone News
bottom of page