How a Diversified Investment Strategy Will Help You Keep a Level Head, Ep #84

You know that the key to investing is having a diversified investment strategy and on this episode of Retirement Starts Today you will hear how people that decided to switch gears during the crisis ended up losing out. We will also discuss the Lyft IPO and why betting on individual stocks is no safer than gambling in Vegas. You’ll also learn why the falling healthcare market probably affects your 401K and why you have healthcare in your portfolio to begin with. Listen to this episode to hear the latest retirement headlines and what they mean to you.

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Outline of This Episode

[2:22] Lyft IPO troubles
[5:43] Healthcare stocks are taking a hit this year
[9:59] How did the financial crisis affect individual investors 10 years later?

What do Lyft IPO troubles mean for your investment life?

Lyft went public at the end of March and aside from it jumping from $72 to $90 that same day, shares have been languishing. They are now in the mid to high $50s. Everyone was predicting this to be the next big thing and many of the big tech companies got in before it went public. Names like Fidelity, Google, and General Motors bought shares around $40-$50. So what? Well, if the biggest names in tech investing can make a bad investment in their own space then so can you. You won’t always pick a winner and the loser may even wipe out all your gains from your previous wins. Just like when gambling in Vegas, don’t play the stock market with more than you can afford to lose. Having a diversified investment strategy is the key to investing.

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Healthcare stocks are taking a hit this year

Over the past 10-15 years healthcare services have been going up, but recently they have taken a tumble. Everyone has some healthcare and energy in their portfolio. They are the 2 of the most common sectors I see in retirement portfolios. But why are they in everyone’s 401K? You probably own a bit of healthcare and energy for the same reasons. Since healthcare has done very well over the past 10-15 years it may stand out to you when you choose what to fill your portfolio with. But past performance doesn’t predict future results. You know that you should have a diversified investment strategy. But how should you choose what to put into your portfolio? Listen to this episode of Retirement Starts Today to find out a better way to choose what to put into your portfolio.

How did the financial crisis affect individual investors 10 years later?

The American Association of Individual Investors (AAII) recently asked investors how their investments have been doing since the financial crisis of 2007-2009. They asked the following questions:

What lasting effect did the market have on their investments?
- 46% changed their investment strategy
- 22% became more conservative
How has their risk tolerance changed 10 years later?
- 40% say they became more conservative due to their age rather than because of the financial crisis
- 13% are less tolerant of downside risk
Did they pull their money out during the crisis?
- 53% did not pull any money out of the market
- 60% of those who did pull money out put their money back in 2009
- 18% put their money back in in 2010
- 12% did not enter back into the market

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Why you need to stick to your diversified investment strategy through thick and thin

The AAII survey was asked among well-informed investors so the results are quite interesting. It seems like half of those questioned decided to change their strategy in the middle of the market crisis. If you receive new, actionable information then its ok to change your investment strategy, but you never want to change your strategy as a reaction to a market downturn. Doing so will usually cause you to lose money. Having an investment strategy will help you keep a level head during times of crisis. Will your diversified investment strategy help you through a crisis?