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Once you have done your due diligence and partnered with a financial planner, the next step is going to be consolidating all of your assets. So what exactly does this mean and what does it entail?
As we are building retirement assets, rarely are these assets all with one investment company. There may be a couple of 401(k) plans, a 403(b), the online account you set up to trade stocks, the IRA your brother-in-law’s cousin sold you decades ago, a couple of old life insurance policies, a random individual stock account, and so on.
While some would argue that having these assets spread across various investment companies represents diversification, true diversification comes with the underlying investments within these accounts. These underlying investments fall into what are called ‘Asset Classes.’ The important asset classes to diversify a portfolio include:
These 10 asset classes can provide all of the diversification an investor would need.
Think of investment companies as grocery stores, and asset classes as the goods inside of the grocery store. Does buying a bunch of bananas at Price Chopper, another at Hannaford, and another at Wegmans represent a well-diversified fruit basket? Of course not, if fact it’s the opposite as you are concentrated in just bananas.
Same with investment companies, diversifying across companies is not diversification, it’s diversifying across the underlying assets at the investment company that matters.
Just as most of us can get all of our goods from one grocery store, an investor can get all of their diversification from one investment company. What are some of the other benefits of consolidating assets?
The consolidation of assets would be coordinated by the financial professional with your primary responsibility being the gathering of all financial statements.
Asset consolidation can create clarity, efficiency, cost savings, better portfolio management and several other benefits as you continue to plan and prepare for retirement.
Retirement Planning Part 1: Partnering with a Financial Planner
Retirement Planning Part 3 – Portfolio Management