This week Jim and Cathlyn discuss the issue of diversification in one’s portfolio. The title comes from a recent Wall Street Journal article called “Confronting Clients with Diworsified Portfolios” (subscription required). The article looks at the idea that there is such a thing as “too much diversification” in a portfolio. Whether your portfolio holds too many different assets, or too few, your portfolio’s diversity, or lack thereof, may be a reason why it is underperforming. Jim and Cathlyn look at examples of when diversity becomes “di-worsity” and how appropriate diversification depends on the goals of the client. They offer a case study to further clarify the issue. The guest this week is attorney Jerry Schlichter who won a $35 million settlement last June in a class action lawsuit against Prudential and Cigna Corp. dealing with 401(k) abuses benefiting the companies, including structuring fees to profit plan administrators, and requiring participants to invest in the companies, without providing suitable alternatives. He will discuss 401(k) abuses and the importance of reviewing your retirement plan at work.
Resources
- The pros' guide to diversification on Fidelity.com
- Beginners' Guide to Asset Allocation, Diversification, and Rebalancing on SEC.gov
- Building Your Portfolio: Using Diversification on FINRA.org
- Asset Allocation on Investor.gov
