Personal Wealth Management / Financial Planning

Are You as Diversified as You Think? | Fisher Investments Common Retirement Investing Mistake #1

Retirement is supposed to be an exciting time. Finally, you have the time to travel and pursue the hobbies that you were unable to during your working years. Unfortunately, many spend much of their retirement worried about their finances. At Fisher Investments, we’ve helped thousands of individuals and families plan their financial futures so they can enjoy a comfortable retirement.

Transcript

Visual

Title screen appears, “Common Retirement Investing Mistakes”

Subtitled, “Mistake #1: Improperly Diversifying”

Audio

[Music]

Visual

Jessica Smith appears on the screen in a navy suit, she is standing next to a TV screen. she begins to speak:

Audio

Jessica Smith: Diversifying your investments across countries, sectors and individual securities is a tried-and-true strategy for mitigating risk.

Visual

On the TV screen, a basket appears full with eggs then a hand appears picking up one additional egg and placing it to the lot in the basket.

Audio

Jessica Smith: When it comes to investing, it makes sense not to put all of your eggs in one basket. Over the years, we have seen several ways investors misinterpret this advice, often resulting in overly concentrated or an inefficient portfolio.

Visual

On the screen TV, more eggs are being added to the basket.

Audio

Jessica Smith: Some investors concentrate too much of their portfolio in a single investment and possibly take on more risk than is prudent. Investors may end up doing this when optimism or overconfidence makes this action seem safe.

Jessica Smith: For example, you may hold a significant portion of your portfolio and your company's shares, perhaps because the company has done well for years or because you have a good feeling about future prospects.

Visual

On the screen TV, the eggs are vibrating, cracking and then breaking.

Audio

Jessica Smith: Calculations like these may be based more on emotion than on economic fundamentals. But, if that seemingly stable security becomes volatile or loses significant value, your retirement could be in jeopardy.

Visual

On the TV screen, 5 baskets partially full of eggs are being displayed.

Audio

Jessica Smith: Alternately, some investors attempt to diversify by investing in five, six or more funds, presuming that they will increase diversification. However, depending on the underlying holdings in those funds, this could leave you over diversified.

Visual

On the TV screen, the eggs in each of the 5 baskets appear to be growing in number.

Audio

Jessica Smith: If each of your funds holds hundreds of different securities, you could potentially have exposure to thousands of individual securities.

Exposure to so many stocks can make even matching the performance of the overall market difficult once fund fees are taken into account.

Alternately, you might end up owning the same securities many times over, leaving you too concentrated in certain companies.

Visual

On the TV screen, a table with 3 rows and 6 columns appears titled, “Fidelity Large Cap Value and Growth Mutual Funds”

Audio

Jessica Smith: For example, two Fidelity mutual funds, large Cap Value and Large Cap Growth Enhanced contain 64 of the same holdings. 38% of the Large Cap Growth Enhancement funds holdings are also held by the Large Cap Value funds. If you hold these two funds in an attempt to diversify your portfolio in manage risk, you may be actually creating a more concentrated portfolio that is less diversified than you'd hoped.

Visual

Jessica Smith appears back next to the TV screen. 

The TV screen has in it a list titled “The 7 Common Retirement Investing Mistakes”.

The list is as follows:

1. Improperly Diversifying

2.Trying to Time the Market

3. Misunderstanding the Risk-Reward Trade-Off

4. Ignoring Inflation

5. Ignoring International Stocks

6.Overestimating How Far Your Social Security Benefit Will Go

7.Paying Excessive Fees

Audio

Jessica Smith: Thanks for watching.

You can check out our other six common retirement investing mistakes to learn more about what to avoid as you plan for your financial future.

Visual

Screen changes to the title Fisher Investments. Underneath the title there is the red YouTube subscribe Button.

Audio

Jessica Smith: If you enjoyed this video, you can click the subscribe button and ring the bell to be notified when we publish new content.

Thanks for watching.

Visual

Jessica Smith finished talking, and a series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of fisher investment or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein”.

Audio

[Music]

Image that reads the definitive guide to retirement income

See Our Investment Guides

The world of investing can seem like a giant maze. Fisher Investments has developed several informational and educational guides tackling a variety of investing topics.

A man smiling and shaking hands with a business partner

Contact Us

Learn why 145,000 clients* trust us to manage their money and how we may be able to help you achieve your financial goals.

*As of 12/31/2023

New to Fisher? Call Us.

(888) 823-9566

Contact Us Today