--- title: Does it Still Make Sense to Diversify Your Portfolio? description: The end of the year is a good time to review your portfolio diversification strategy and decide on adjustments to make in the coming year image: https://www.letsassemble.com/hs-fs/hub/10700/file-2234510149.jpg --- [![Assembly Wealth](https://www.letsassemble.com/hs-fs/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png?width=300&height=70&name=Assembly-Wealth-Logo-Orange-500px.png "Assembly Wealth")](https://www.letsassemble.com/) The Money Manager People TM [800-541-7774](tel:+18005417774) [![RESEARCH MONEY MANAGERS](https://no-cache.hubspot.com/cta/default/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5) [![Client Center](https://no-cache.hubspot.com/cta/default/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2) [Home](https://www.letsassemble.com/) WrapManager's Wealth Management Blog When life changes, we can help you thoughtfully respond. [< Back to read another post](https://www.letsassemble.com/wealth-management-blog) # Does it Still Make Sense to Diversify Your Portfolio? Posted by [ Gabriel Burczyk | Founder & CEO](https://www.letsassemble.com/wealth-management-blog/author/gabriel-burczyk) December 16, 2014 - [Tweet](https://twitter.com/share) As we approach the end of each year, we like to take a look back at which areas of the market outperformed others. As investors, this allows us to analyze why certain areas of the market may have done better than others, and it make us think about what we can expect looking forward into the coming year. Pulling up performance for this year-to-date (as of December 16th) shows us that US stocks as measured by the S&P 500 outperformed Europe, Asia and the Far East (EFA), and small cap stocks (IWM): [![YTD_Performance-1](https://www.letsassemble.com/hs-fs/hub/10700/file-2236050337.jpg)](https://www.letsassemble.com/hs-fs/file-2235566944-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_Dow_chart.pdf) [Click for larger view](https://www.letsassemble.com/hs-fs/file-2235566944-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_Dow_chart.pdf?t=1418774338847) These differences in performance may lead investors to wonder… ### Why Not Just Invest Everything in the S&P 500? If your financial advisor has you invested in a diversified portfolio consisting of international holdings, fixed income, perhaps some Emerging Markets, and so on, you might be asking yourself—with the S&P outperforming these other categories, does it still make sense to be so diversified? Investments outside of the S&P 500 are seemingly just dragging down returns, right? It may be tempting to chase the asset class with the highest recent return, but as the chart below illustrates such a strategy may not deliver better returns with lower risk over time. Diversification can be a powerful and prudent tool for investors: [![Does_it_Still_Make_Sense_to_Diversify_Chart1](https://www.letsassemble.com/hs-fs/hub/10700/file-2234510149.jpg?width=498&name=file-2234510149.jpg)](https://www.letsassemble.com/hs-fs/file-2234726739-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_1.pdf) [Click for larger view](https://www.letsassemble.com/hs-fs/file-2234726739-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_1.pdf)   Just because the S&P 500 outperformed a few other categories this year does not necessarily imply it will be the best performer next year or the year after. If as an investor you shift a larger percentage of your portfolio into the S&P 500 thinking 2015 could yield the same results as 2014, you could not only increase the risk in your portfolio, you’ll also potentially miss out on having exposure to whatever the best performing asset class will be next year.The chart below underscores this point, showing how each asset class performed year over year. For example, Emerging Markets (MSCI EME in the chart), was the best performing asset class in 2005, 2007, and 2009 , with returns of 34.5%, 39.8%, and 79%, respectively. However, you don’t always get such stellar performance from investing in the Emerging Markets, as 2008, 2011, and 2013 demonstrate. In those years, it lagged almost every other category and posted negative performance of -53.2%, 18.2%, and -2.3%. [![Does_it_Still_Make_Sense_to_Diversify_Chart2](https://www.letsassemble.com/hs-fs/hub/10700/file-2234627275.jpg?width=499&name=file-2234627275.jpg)](https://www.letsassemble.com/hs-fs/file-2235537497-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_2.pdf?t=1418761048629) [Click for larger view](https://www.letsassemble.com/hs-fs/file-2235537497-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_2.pdf?t=1418761048629) While diversification cannot not guarantee profit or protect against loss in declining markets,diversifying your portfolio across asset classes can allow you to participate in a variety of areas in the market and create less exposure to one or just a few asset classes as the market changes over time. ### Looking Ahead: What to Expect for 2015 As seen below, JP Morgan sees forecasts broad-based growth across the world next year. They project emerging markets to see better growth rates next year, as well as much of the developed world on balance.2[![Does_it_Still_Make_Sense_to_Diversify_Chart3](https://www.letsassemble.com/hs-fs/hub/10700/file-2230853123.jpg)](https://www.letsassemble.com/hs-fs/file-2233286901-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_3.pdf?t=1418761048297) [ Click for larger view](https://www.letsassemble.com/hs-fs/file-2233286901-pdf/PDFs_-_Blogs,_Reports,_etc/Does_it_Still_Make_Sense_to_Diversify_Your_Portfolio_3.pdf?t=1418761048297) ### Diversification Can Also Help Reduce Volatility A look back at 2014 also reminds us of the role volatility can play in any given year. Reviewing the S&P 500 chart at the beginning of this post, you can see that the market took two significant dips over the course of the year, one late in July and the other at the outset of October. Such market declines can be worrisome as they occur but having your asset allocation and investment plan in place can help you stay focused on the bigger picture. As Dr. Kelly of JP Morgan puts it, “stock volatility is inevitable but is unpredictable in both magnitude and timing—that is why investors need to be diversified across asset classes.”1We couldn’t agree more. ### Have Our Wealth Managers Check Your Portfolio’s Diversification The end of the year affords the opportunity to review your holdings, check performance, and make the necessary adjustments based on the market outlook and your changing goals and objectives. Our Wealth Managers are available to help you go into 2015 with confidence in your investment plan. Give us a call at 1-800-541-7774 to get started, or you can start the conversation by contacting us [here](http://www.wrapmanager.com/contact).    ---   Sources: 1. [JP Morgan Q4 Commentary](https://www.jpmorganfunds.com/cm/Satellite?UserFriendlyURL=diguidetomarkets&pagename=jpmfVanityWrapper) 2. [JP Morgan Guide to Retirement](https://www.jpmorganfunds.com/cm/Satellite?UserFriendlyURL=diguidetoretirements&pagename=jpmfVanityWrapper)               [Portfolio Diversification Strategy](https://www.letsassemble.com/wealth-management-blog/topic/portfolio-diversification-strategy) [![Top-equity-money-manager-picks](https://no-cache.hubspot.com/cta/default/10700/23094163-953c-4a42-b497-b5956166aaab.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/23094163-953c-4a42-b497-b5956166aaab) ### Subscribe to Updates [Subscribe to RSS Feed](https://www.letsassemble.com/wealth-management-blog/rss.xml) [![New Call-to-action](https://no-cache.hubspot.com/cta/default/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf) ### Most Recently Published ### Blog Authors [![Gabriel Burczyk](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381761-jpg/Athors_Avatars/Gabe-avatar.jpg "Gabriel Burczyk")](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk) [**Gabriel Burczyk,**](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk) [Founder & CEO](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk) [![Valerie De Vol](http://www.wrapmanager.com/hs-fs/hub/10700/file-2457588837-jpg/Athors_Avatars/Valerie-De-Vol-avatar.jpg "Valerie De Vol")](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol) [**Valerie De Vol, **IACCP® Chief Operating Officer](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol) [![Seton-avatar.jpg](http://www.wrapmanager.com/hs-fs/hub/10700/file-2344519198-jpg/Athors_Avatars/Seton-avatar.jpg "Seton-avatar.jpg")](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews) [**Seton McAndrews, **CFP® ](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)[Vice President - Investments](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews) [![Doug Hutchinson](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381751-jpg/Athors_Avatars/Doug-avatar.jpg "Doug Hutchinson")](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) **[Doug Hutchinson,](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) **[CFA® ](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)[Director of Research and Trading](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) ![Katie - square.png](https://www.wrapmanager.com/hubfs/Katie%20-%20square.png "Katie - square.png") [**Katie O'Connor **Director of Client Services](https://www.wrapmanager.com/wealth-management-advisors/katie-oconnor) **Important Disclosure Concerning WrapManager Blogs** Blogs found at this site have been created or supported by WrapManager. The information provided in a blog post prepared by WrapManager or an associated person of WrapManager is generally limited to financial and economic issues, but may include a discussion of general interest items. The views and opinions expressed on this blog are purely the blog authors, and not necessarily those of WrapManager, Inc. Certain blog posts include information pertaining to WrapManager’s investment advisory services and the products and services of unaffiliated money managers. Such information is provided for information purposes only. Accordingly, information provided in a blog should not be construed by any consumer and/or prospective client as a solicitation to effect or attempt to effect transactions in securities or the rendering of personalized investment advice. Any subsequent, direct communication by WrapManager with a prospective client shall be conducted by a representative of WrapManager. Moreover, no client or prospective client should assume content contained on the website serves as a substitute for personalized advice from WrapManager. Different types of investments involve varying degrees of risk, and there can be no assurance that any investment, portfolio or money manager referred to within the blog will be suitable for your individual situation and risk tolerance or will be profitable. WrapManager recommends that you retain a financial professional to provide you with specific guidance regarding your financial situation before investing. Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. Although the information included in the WrapManager, Inc. website and blog has been obtained from sources WrapManager believes to be reliable, we do not guarantee its accuracy and information may be subject to change without notice. This website should not be regarded as a complete analysis of the subjects discussed. Information on this site should not be relied upon as a substitute for legal, tax or accounting advice by a professional in your local jurisdiction. Comments made by third parties are subject to moderation by WrapManager and may not appear on this blog until they have been deemed appropriate for posting. Also, due to the volume of comments received, not all comments will be posted. WrapManager does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party website linked to WrapManager's web site or incorporated within a blog post. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.     ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Gabriel Burczyk", "url" : "https://www.letsassemble.com/wealth-management-blog/author/gabriel-burczyk" }, "datePublished" : "2014-12-17T00:02:00.000Z", "headline" : "Does it Still Make Sense to Diversify Your Portfolio?", "image" : [ "https://www.letsassemble.com/hs-fs/hub/10700/file-2234510149.jpg" ], "mainEntityOfPage" : { "@id" : "https://www.letsassemble.com/wealth-management-blog/does-it-still-make-sense-to-diversify-your-portfolio", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.letsassemble.com/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png" }, "name" : "Assembly" } } ```