Our clients primarily use funds from Dimensional Fund Advisors because they offer a competitive combination of low fees and construction precision compared to any other group of funds.
We use a unique process to help clients choose their correct portfolio from over 100 customized portfolios inside the Edelman Managed Asset Program. Constructing the right portfolio is a delicate balance between risk and reward. Below is a sample of one of our portfolios.
The sample portfolio displayed below is for educational purposes only and is NOT presented as investment advice and should not be interpreted as such.
Please consult an investment professional to discuss your personal situation.
Don’t put all your eggs in one basket. What does this really mean? If you put all your eggs in one basket and then drop the basket, you may lose all your eggs. Similarly, if you invest all your money in a single asset class such as small cap mutual funds or large cap stocks and that asset class underperforms, you may lose a significant portion of your money. In the investment world this problem is solved through diversification of assets and managing risk exposure in your portfolio.
How many eggs go in which baskets? Asset allocation is the first step in creating a diversified investment portfolio. Asset allocation means deciding how investment dollars should be allocated among broad asset classes such as stocks, bonds, and cash. Correctly diversifying an investment mix amongst the various asset classes is the key for managing market volatility and may be responsible for over 94% of a portfolios performance.
Because asset classes often perform differently under different market conditions, spreading assets among them has the potential to help reduce investors overall risk exposure. The underlying principle is that different asset classes have shown different rates of return and levels of price volatility over time and different asset classes often respond differently to the same news, as you know stocks may go down while bonds go up, or vice versa.
So how much are you putting in each basket? If you have too much allocated to cash, you may run the risk of losing money to inflation. If you have too much allocated to small cap mutual funds or stocks, you may be losing sleep at night dealing with the daily fluctuations in the market. The answer is different for everyone. Investors must consider their tolerance for risk, their financial resources, their long-term goals, and the investment timeframe to figure out the appropriate mix for themselves.
What Diversification is NOT. Spreading assets amongst several different investment advisors or accounts is NOT an effective diversification strategy, especially if all those accounts contain similar holdings. For example, if you have a 401(k), IRA, and brokerage account and all are invested in large cap stocks – all your eggs are still in the same basket.