My wife and I had gone on vacation and we went to see a program that included a number of acts. One of them was a group of talented acrobats that did various balancing acts. The one trick I was impressed with and remembered was when this performer put spinning plates on poles, he put one on his forehead, then one on his nose, another on his hand and finally
standing on one leg he put one on his knee. All of the four plates were spinning in unison at the same time. I have trouble carrying a bowl of soup to the table without spilling a drop.
I think most of us are always trying to find some sort of balance in our lives. Family, work, pleasure, carrying soup. Speaking of family and balance, I had promised to take the grandkids to the movies and I remember that I had something to do for work. So it was either go to
work or fulfill my promise to the grandkids. The thought crossed my mind that there was always something to do at work but the grandkids won’t be kids forever. We had a great time at the movies.
For the fixer uppers, that also goes for our tool kits. We want good pliers and vice grips, Phillips screwdrivers as well as a straight edge. In other words, balance gives
us preparedness to meet situations that come up all the time. I have lots of tools.
All of this balance talk has a lot to do with our lives and since our financial wellbeing is a part
of our comfort zone, investments play an important role in our lives. So let’s talk about that balance. As I mentioned in previous articles there are basically five different investment objectives with variations. In the last two articles I mentioned the two most conservative. “Income with Capital Preservation” and “Income with Moderate Growth.”
Now we go to “Growth and Income.” In many circles this is called a balanced portfolio. Usually
a mixture of about 60% stocks and 40% cash and bonds. But don’t let the name fool you. I have analyzed some Growth and Income portfolios (balanced) and the stock portion
was all large cap growth stocks. That’s not a balanced stock portion of the portfolio. Balanced would be a combination of large cap, mid cap and small cap growth as well as large, mid and small cap value stocks, domestic as well as foreign. Balance has to do with offset. In some situations growth goes up and value goes down and vice versa. The same with domestic and foreign investments, like a teeter totter.
Same with the bonds. All of one kind is not balance. Perhaps investment grade BBB and above as well as below investment grade or high yield. Although below investment grade is more volatile and subject to added risk, it can also pay a higher yield.
Alternative investments that have an objective not correlated to the stock markets can also be in the mix. However, more understanding as to how alternatives fit in should be studied and understood before using them. Your financial advisor can help.
In summary, balanced isn’t all this or all that, but a combination of securities that gives you that all important diversification.
John Masus is an LPL registered Principal with clients in 24 states. Securities offered through
LPL Financial, member FINRA/SIPC. You can email firstname.lastname@example.org or visit our website at masusfinancial.com. His office has been located in downtown Batavia for over 20 years.
The opinions in this material are for general information and not intended to provide specific investment advice for any individual. No strategy assures success or is guaranteed to protect against loss. Alternative investments may not be suitable for all investors.