Diversification is investing 101: Tips for expanding your portfolio

Diversification is especially "prudent" in today's volatile market, 401 Financial principal and founder Tyrone Ross says. The financial advisor sits down with Market Catalysts host Julie Hyman to share his strategies for investors to diversify their portfolios and explain why crypto is part of diversification.

To watch more expert insights and analysis on the latest market action, check out more Market Catalysts.

Video Transcript

00:00 Speaker A

The re-emergence of volatility in the market might give investors some angst, but it also gives them an opportunity to diversify their portfolio and cover their bases in the event of extended turbulence. Joining me Tyrone Ross, 401 financial principal and founder for this week's FA Corner brought to you by Capital Group. And Tyrone, I wanted to talk to you about this because

00:20 Speaker A

everybody has been saying diversification to me lately. Like that is sort of a, a I mean it's sort of an old school buzzword, but it's become a buzzword again. And so when you're talking to your clients, um, I guess I should ask first of all if they're worried um, about the broader environment and if you're telling them to to diversify.

00:39 Tyrone Ross

So, yes, they are worried. Um, it's it's palpable and also to be frank, other financial advisors are reaching out to our firm about their clients being worried. So I think it is a concern out there amongst not only our clients but everyone generally. It's just a lot of things that are happening at once.

01:00 Tyrone Ross

Um yeah, diversification is always, you know, 101 when it comes to investing. Obviously, not putting all your eggs in one basket as our grandmothers used to tell us. Um but how you diversify? What does that mean, right? Is that going to cash? Is that, you know, um buying puts? Is that a little gold allocation, some alts, whatever that may be. Again, time horizon, age, goals matter here, but I do think diversification right now is prudent based on what your goals are and where you sit looking in the market.

01:29 Speaker A

So, so let's just take an example, Tyrone, because I know a lot of your clients are on the younger side. And so maybe they have a larger risk appetite. So if I'm, you know, if I'm many years away from retirement, and I'm trying to build up to that goal, and I'm young, how does that diversification look for me, you know, versus somebody who's older?

01:50 Tyrone Ross

Well, here's what we say and here's what we do. We try to obviously get young clients just into the market, right? Because concentration helps build wealth as you go into your peak earning years, right? Diversification helps you keep it. So we want to get them exposed to markets. Obviously, there should be a greater equity um allocation there. But I think

02:14 Tyrone Ross

you don't want to get into the position now where you are 25, 35, even 45 years old and being so um shocked, right? Or or paused by what's happening that you don't invest in the market and that you kind of again, you're in cash too long or you don't really want to expose yourself. So again, diversify in terms of education, diversify in terms of different asset classes for sure, but be exposed enough and take a little bit of concentration risk so your upside is higher.

02:46 Speaker A

And and you guys have some expertise in crypto in particular. So how what role does that play in this whole diversification discussion?

02:59 Tyrone Ross

Well, I I would venture to say we're probably the most crypto forward RAA in the country. So we we are more than um, you know, a little exposed to it. But I think so we we have a lot of clients that come to us that own a ton of it. Um we try to make it a prudent part of our conversations with clients. I've been saying this that this is the first time in my career um as a financial advisor. I've been in crypto 12 plus years where I felt like I had a fiduciary responsibility to at least have the clients, the the conversations with clients.

03:22 Tyrone Ross

So, I think we think it's a core part of what folks should own. Um if folks aren't ready or they're fearful, we lean a lot on education. We educate a lot. We make it a part of every conversation even if they don't own it. So they start to feel our comfortability, my partner and I, my CIO CIO of our firm, and my partner Eric Smith again, we've both been in it um a long time. We're overexposed to it as financial advisor, but we know it inside and out and I think clients trust us for that.

03:57 Tyrone Ross

But I think we try to make sure that one clients are educated, two, they get access through us trusted uh fiduciaries. and then also we get them some exposure meaningfully based on age and what their goals are.

04:13 Speaker A

Tyrone, good to see you. Thanks a lot for joining us.

04:16 Tyrone Ross

Thank you so much for having me. Have a great weekend.

04:19 Speaker A

You too. That was FA Corner brought to you by Capital Group.

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