It’s the most recommended practice in investing.
It’s the basic principle of “not putting all your eggs in one basket.” It’s common sense.
From CNBC to your financial advisor, you hear the same, simple advice: “Diversify your investments.”
They give you advice that looks good on paper: “Buy stocks in several different sectors.”
They think you should look at owning growth stocks, dividend-paying stocks, large-caps, small-caps, tech and gold. And at the end of the day, you could easily build a portfolio that checks all these boxes.
It just may not generate the results you expected.
That kind of diversity isn’t as helpful as they like to think.
A lot of investors were “diversified” going into the 2008 global financial crisis, but still experienced steep losses.
All 10 main sectors of the market fell in 2008. In the depths of the crisis, they were down anywhere from 20% to 60%. Gold was the only asset to climb, and even it was down 10% at one point in 2008.
But you don’t need to worry. There’s a better way to diversify out there. And you don’t need to trade multiple sectors — it’s all about the strategies.
Sector Diversity Won’t Save Your Portfolio
I could trade just one sector, implement multiple strategies on it and be more diversified than anyone could be trading the same approach across as many sectors of the market as they wanted.
There were clear problems in diversified portfolios in 2008. Those problems came up again this year with the pandemic-related crash.
When you look at prices from the start of the year compared with the lows of March, the fall was identical to 2008.
The worst-performing sector, energy, was down 60%. The best-performing sector in the S&P 500 was consumer staples, with just a 20% drop. And gold, considered a safe-haven asset, held up best … but still saw a 10% drawdown.
Diversity across sectors didn’t save you this time, either.
But let’s drill down into one sector so that I can show you what I mean about diversifying your strategies.
If you were an income-focused investor, you experienced a steep 35% drop as well — even with the dividend payments.
And this sector, tracked by the WisdomTree U.S. High Dividend Fund (NYSE: DHS), is still down 4% this year.
This is a great example of how you could use diverse strategies in a single sector…
Following my No. 1 income strategy, readers of one of my services are up 12.7% this year.
If you’d just followed one strategy — buying and holding DHS — you’d be down 4% right now. But following a different strategy on the same sector could have sent you up over 12% — a gain in a volatile period of the market.
I didn’t just recommend a bunch of dividend-paying stocks. I focused on an income-based strategy to generate a consistent return this year.
And that’s the key.
True diversity is not about owning all the sectors in the market — it’s about using different strategies to get ahead in volatile times.
1-Click Way to Access Diverse Strategies
That’s why I want you to put this date on your calendar: December 16.
On that date, you’ll get a get the chance to see my income approach — the same one that has produced a double-digit gain this year.
Plus, you’ll get exclusive access to a strategy that profits from seasonal trends. And you’ll get to see our No. 1 options service. That’s all in one package.
It’s the essence of diversity. All of these strategies, together, can protect your portfolio — regardless of what’s going on with the stock market.
This is important: None of these strategies are available to the public right now.
But on December 16, the doors will open for an incredible deal.
With these three approaches and more, you’ll be well on your way to having enough strategies for a fully diversified portfolio.
So, be sure to tune in here on American Investor Today next Wednesday, December 16.
Chad Shoop, CMT
Editor, Quick Hit Profits