Correlation within the equity market is dangerously high right now, and without proper diversification, investors might see their profits slipping through their fingers. But how can an investor tell if their investments are too closely correlated?
In this video, Brian Jacobsen, Chief Portfolio Strategist for Wells Fargo Advantage Funds offers some easy tips, beginning with a common sense tip – just check the statement. Does the portfolio move in tandem with the S&P 500? If so, some diversification is in order.
Mr. Jacobsen also discusses how liquid alts can help with the problem of high correlation and offers some tips on how to use them advantageously. He cautions that alternatives aren’t just a tool to achieve diversification – the alternatives strategy itself must be diversified.