Global Diversification

Diversification in investing refers to the process of spreading out risk. When investors concentrate their investments, they may increase their risks without adding the benefit of higher expected return. In other words, investors may not be rewarded for taking higher risk that is associated with concentrating their investments; i.e. picking a few specific stocks for their portfolios. The result is that over a long period of time, the risk of an individual stock may be about 2.5 times that of a market index with no expected extra payoff. Global diversification is a good idea because the international market is increasingly important in the world economy.

One prudent approach to minimize risk and maximize the probability of achieving an optimal return may be to hold an index portfolio. IFA's ten Index Portfolios are globally diversified and are calibrated to capture specific risk exposures that have rewarded investors over time.

To view the IFA Index Portfolio allocations, please click here.

"In choosing a portfolio, investors should seek broad diversification. Further, they should understand that equities--and corporate bonds also--involve risk; that markets inevitably fluctuate; and their portfolio should be such that they are willing to ride out the bad as well as the good times."

- Harry Markowitz, October 7th, 2008