Balance risk and return to create investment balance

Even if you’re not an investment expert, you’re probably familiar with the term “diversification.” It means not putting all your eggs in one basket. Diversification calls for choosing the right mix of investments to keep a balance between risk and return.

* Choose the right investment mix. While there is no single asset mix appropriate for all investors, most people should have some combination of stocks, bonds, and cash in their portfolio. The right investment mix for you depends on your age, income, family responsibilities, and your tolerance for risk.

* Take a look at your mutual funds. Many mutual fund investors believe that they are well-diversified, even though they aren’t. For example, it’s possible that different mutual funds own many of the same stocks or similar stocks in the same industries. Whether you’re thinking about buying a fund for the first time or you already own several of them, it pays to do a little digging. All mutual funds are required to publish a list of their complete holdings at least twice a year. Get the most recent listing for your funds and compare them for overlapping investments.

* Consider the big picture. When you review your portfolio for diversity, consider the investments both inside and outside your retirement accounts. They are parts of the same picture. Doubling up on the same investment in both types of accounts may decrease your diversification and increase your risk.

* Keep an eye on your 401(k). As a general rule, you should avoid being too heavily invested in any one company’s stock, including that of the company for which you work. If your employer matches your 401(k) contribution with company stock, consider other investments for your own 401(k) contributions and for the money you invest outside your 401(k) plan. When you’re allowed to do so, consider selling enough company stock to rebalance your 401(k).

Don’t risk your financial future by putting too many eggs in one basket. If we can help evaluate your situation, give us a call.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She currently sits is a board member at two local organizations. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor.
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