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Latest Episode - The Paul Truesdell Podcast
Business
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The Diversification Myth That Cost Investors in 2022
Many investors think they're diversified because they own different mutual funds and ETFs. This is a dangerous mistake.
In 2022, investors learned this lesson the hard way. Stocks went down. Bonds went down. Even international funds lost money.
2022 Total Returns:
- U.S. Stock Market: -19.4%
- International Developed Stocks: -14.0%
- Emerging Markets: -19.7%
- U.S. Bond Market: -12.9%
- Global Real Estate: -24.5%
The old rule of "diversify and you'll be safe" failed because most portfolios weren't truly diversified.
The Hidden Problem
Here's what most people don't realize: owning five different mutual funds that all behave the same way under stress isn't diversification—it's false comfort.
Fund families often overload their products with the same companies. We've done research on this concentration problem, and it's quite frightening. Many seemingly different funds own identical stocks, creating hidden risk.
Real Diversification
Truly diversified investors don't just own more stuff. They own uncorrelated assets with specific roles:
- Some investments for growth potential
- Some for stability during market stress
- Some for income or tax efficiency
Each piece serves a purpose, not just a ticker symbol.
Building Stronger Portfolios
We help clients build portfolios where every investment has a job. It's not about guessing which way markets will move. It's about creating a portfolio that can take a punch when markets get rough.
Real diversification means understanding what you own and why you own it. It means looking beyond fund names to see what's actually inside.
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