Seeking counsel from many others who are trustworthy and more knowledgeable than you in the financial arena results in the greatest financial protection possible. This diversification including asset allocation is a powerful tool to help you attain and maintain wealth. It gives you the ability, with longevity, to provide well for your family and give abundantly with longevity to your church and other ministries to spread the gospel and help meet the needs of others.
Diversification encourages you to use a variety of different advisors (brokerages, banks, investment advisors, brokers, CPA, etc.) and investment vehicles (stock and bond mutual funds, real estate, etc.). This provides greater protection from loss when a particular investment in your portfolio suffers a great loss in value. God forbid that this happens, but history has shown that it does occur frequently among investments that have great equity risk.
Diversification enhances the possibility that other investments will increase to remove the possibility of a fatal blow to your asset when the market value of one of your investments decreases because the different types of investments tend to have ups and downs during different periods of time.
The bible says give a portion to seven or eight because you don't know what evil may come upon the earth. The old saying “don't put all your eggs in one basket” is in line with this biblical instruction. Following this principle of diversification will protect your savings and investments in the sense that if the investment market drops one basket of eggs you will still have at least six other baskets of eggs that have not been dropped. It is very likely that these will investments will not have suffered a loss of value but instead have continued to grow in value.
Another component of the “many counselors principle” that you should employ along with diversification is asset allocation. It encourages you to buy different types of investments in percentages that are reasonable for your age, risk tolerance, and life situation. For example, a 20 year old might keep 80% of his investments in large cap and small cap no load index mutual funds and 20% in no load mid-term bond index funds whereas a 70 year old might keep 30% of his investments in total market no-load index funds and 70% in no load short-term bond index mutual funds and guaranteed fixed-income investments.
History has shown that the greater large and small cap equity investment provides the opportunity for the younger investor, who has time to overcome market losses, to potentially grow the investment to a much greater degree during the next 30 to 50 years even though he will endure various market losses in the interim. For the older investor who does not have time to make up for market losses, the larger bond and fixed income investments provide greater protection against losing principal.
Age appropriate diversification and asset allocation enhances the possibility that other investments will increase to remove the possibility of a fatal blow to your asset when the market value of one of your investments decreases because the different types of investments tend to have ups and downs during different periods of time.
There are a plethora of brokers, advisors, and some scam artists willing and ready to convince you to give them your money. You should educate yourself to any type of investment you think you want to put money in before you do so to ensure that you are comfortable with risk associated with that investment. Always thoroughly check the licensing status and complaint background of brokerage houses, brokers and advisors using information on file with the Securities & Exchange Commission (SEC), your state securities regulator, Financial Industry Regulatory Authority (FINRA), etc.
Identify the 1-year, 3-year, and 5-year investment return for each investment and compare it to the market benchmark for that type of investment to ensure that the growth average annual growth you seek has been gained by the investment in the past. Educating yourself in these areas will provide you with information you need to make good choices about your risk tolerance, the suitability of the investment given your income and net worth, and the integrity of the brokerage, broker, and investment advisors.
Please pray for this ministry and email any questions. May God bless you richly as you follow His plan!!!
Proverbs 11:14, Ecclesiastes 11:2, Luke 19:13, Acts 6:2-4
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You can find books authored by Randy and Karen Parlor at www.Amazon.com.
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