The Difference in Diversification

The Difference in Diversification

January 12, 2019 Resource Center 0 Comments

By Aaron Izenstark, Co-Founder and Chief Investment Officer

Dick Friedman recently shared a post about the importance of a long-term mindset when it comes to investing. With long-term investment goals, not only is consistency key, but diversification is another essential part of the well-rounded investment portfolio.

We recently compiled “A Comparison of Potential Risks and Returns” of diversified and non-diversified asset mixes over 31 years (1/2/1987 – 12/31/2018), and the history is clear. The data shows that while the average of compounded annualized returns between diversified and non-diversified portfolios is significantly close, the risks were notably higher for non-diversified portfolios. In general, when reviewing the maximum drawdown, longest drawdown, annualized standard deviation, and worst monthly returns, the risks were more than 40% higher for non-diversified portfolios.

You can review the full comparison here, along with an illustration of the “7 Largest U.S. Stock Market Drops Since 1987.”


Fig. 1 IRON Financial, 2019


IRON Financial offers a range of diversified portfolio solutions. Please contact your Regional Product Specialist for more information on our portfolios.