Between new technologies (like mobile trading apps) making investing more accessible and online media outlets and social media raising awareness, it’s no wonder so many people are waking up to the power and potential of investing.
But, there’s much more to learn about investing beyond the stock market. To help manage their savings effectively, any investor, new or experienced, should learn about an important strategy: portfolio diversity.
What is portfolio diversity?
Traditionally, a diverse portfolio has meant investing in a mix of stocks and bonds.1
But investment strategies continually evolve and improve. As mentioned, new technology is providing investment access to more people than ever before. At the same time, there are time-tested financial tools that often get overlooked. When used together, these methods can help you build a varied financial strategy and build confidence for the long term — and add diversity beyond stocks and bonds. Working with a financial advisor can help you tap into the new tools, as well as benefit from some of these lesser-known strategies.
Insurance options for your life today
The goal of portfolio diversification is protection: helping to keep your investments protected 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 1 in 4 people will become unable to work for a substantial length of time due to illness or injury. In a crisis, disability insurance can help replace a portion of your income if you’re too sick or injured to work, helping you 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 help protect your partner, too.
Whole life insurance adds diversity
Another tool for adding diversity is whole life insurance. First and foremost, a whole life policy can help give your loved ones financial protection. Whole life insurance may be especially useful after you have children. Plus, as you pay your whole life premiums, the cash value component accrues as an asset, and you can use this asset to help finance big goals like your child’s college education or starting your own business.2,3 The cash value is 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.4
Annuities provide income in retirement
Annuities are another tool that can help you reach long-term goals. They’re sometimes referred to as “insurance for retirement.”5 With annuities, people pay a financial institution a single lump sum or make several payments over time depending on the type of annuity. Once the annuitization phase is reached, annuities can provide guaranteed income in retirement,6 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 help protect your assets.
A Park Avenue® Wealth Management financial advisor can help you create the best strategy to protect yourself and your loved ones, save money, and invest for your long-term goals.