Thursday, September 4, 2014

Build Your Portfolio Like You Build Your Fantasy Football Team

This time of year everyone who plays fantasy football is in the midst of
drafting their team. An enormous amount of time and energy will be spent
researching this year’s potential sleepers and busts. If only we spent that
much time building our portfolios.

A basic fantasy football team is made up of a quarterback, two running
backs, two wide receivers, one tight end, one flex player, one defense and
one kicker. Everybody ends up drafting at least the appropriate number of
players to fill each of those slots.

But when the average person invests they end up owning many funds that do
the same thing. I see it all the time; someone will have six US large cap
stock funds and claim they are diversified. This is the fantasy football
equivalent of drafting six quarterbacks when you can only play one.

A properly diversified portfolio will include US large and small cap stocks,
international large and small cap stocks, emerging markets stocks,
commercial real estate (REITs), commodities and various types of fixed
income. These are the building blocks of a solid portfolio.

After you finish this year’s draft consider checking your investments to
make sure your portfolio is as well diversified as your team.

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