Diversifying + Asset Classes

Adam Stalnaker 0:05
Hey, Adam and Joe here. Today we’re going to talk about diversifying your assets. Why you do it and how you do it. I guess to start, Joe, what in simple terms, what is diversifying your assets mean?

Joe Kovach 0:18
Right, and you might hear the term, you know, in the media or on the internet asset allocation, right, that’s diverse, same thing. You’re saying diversifying assets? And it’s, it’s nothing more than breaking your your investments into different pieces called asset classes, in an attempt to maybe control risk? That’s, that’s the basic textbook definition of that, that that term?

Adam Stalnaker 0:42
And what are some of the asset classes that, you know, some, some are pretty obvious? And I think people know, but I think some of them are newer, and, you know, may not actually know a whole lot about them.

Joe Kovach 0:53
Yeah, right. Which, which, like, you’re saying, what, you know, the, the the tried and true asset classes were stocks, bonds and cash, right? Yeah. And then, you know, you add some other ones into it, real estate, or what we call alternatives, we’ll get into those in a little bit. And then crypto, which is kind of a newer asset classes has been out in the last really kind of grabbed hold in the last couple of years. But those are kind of your biggest asset classes. Now, within those windows, you know, there’s a ton of sub asset classes involved in those as well. But that’s your categories.

Adam Stalnaker 1:22
Now, when you’re looking at those, you know, how does one person how do they want to start? Like, I think crypto is the hottest thing out there. Right? Talk about? Right, you know, should should I just if I’m starting to invest? Should I start in crypto,

Joe Kovach 1:36
right? Yeah, probably not the best place to start, right? It’s a really new infant asset class. Yeah, only gonna be around for a long time. But there’s something like 10,000 Different Kryptos. Now, who knows? Which ones are gonna be good? Yeah, you think back to the to the.com. Era 90, you know, in the 19, late 1990s, right, there were 1000s of companies going public with.com, after your name, there’s only turned out to be a couple of Amazon’s right. You know, a lot of them went missing things probably going to happen with crypto too. So it’s kind of tough to know which ones are going to be really a part of, of the future going forward. Certainly there, there will be some. But you know, in terms of where you start, you probably don’t want to start there. And good, good to have a little piece of it, especially after you have a little bit of money. But you really kind of start with the big one. Stocks, bonds and cash.

Adam Stalnaker 2:22
Yeah, yeah, you definitely want to and there’s there’s different robo advisors and different things out there that you can, for not a whole lot of money start out with with investing with a balanced type portfolio and then being able to put these other pieces in later. And I think what some people need to think about too, is their timeline. Like if somebody wants to invest in crypto but needs the money in a year.

Joe Kovach 2:46
That big gamble there? Yeah, yeah, there’s

Adam Stalnaker 2:48
a whole lot of risk, you know, it’s it can jump up in a hurry, but then it can also drop off in a hurry.

Joe Kovach 2:54
Right? And so could suck, right? It’s like anything else? Sure. You really get that’s where you got to maintain that balance portfolio. Look at your timeframes, like you’re saying is really important. Yeah, you know, if you if you need money in six months to a year, you, you know, probably not good to take much risk with me. Right. But if you’ve got 510 years, that’s why we always say time is your friend. I think that applies in all asset classes it regardless of which ones you’re looking at. And, and, you know, keep in mind, too, when you’re when you’re going through this, this exercise. There’s tons of sub asset classes that come off of those ads. All right, you know, make

Adam Stalnaker 3:27
your head spin.

Joe Kovach 3:30
Just use stocks, for example. I mean, you got small cap stocks, large cap stocks, growth, stocks, value, stocks, international, you name it, there’s so many different categories. And you want to own them all you know, you do. That’s why we’re you know, getting into some good baskets of investments that can own all those different things are really going to help you as you move forward. And then you can kind of control your risk based on you know, how do I have for short term, maybe bonds for intermediate term and growth, growth stocks?

Adam Stalnaker 3:56
And I think it’s important for people to understand kind of their risk adversity too, because and that way, you can tailor a portfolio around it. So feel free to reach out to us we’ve got some tools that kind of help you figure out what kind of your risk profile is, kind of figure out what kind of how to diversify around what your risk adversity is. And you know, what percentages and what type of investments you know, might fit best for you.

Joe Kovach 4:23
Absolutely. And just like we always say, you know, keep in mind, small changes now equal big changes later on. Reach out for help. If you’re not sure we’re happy to assist as well as there’s tons of financial advisors out there that can assist as well, but don’t get your ducks in order.