Portfolio Diversification

One Tool For Managing Risk

Seeking to increase return while reducing portfolio fluctuations.  

Asset classes are broad categories of investments such as stocks, bonds, and cash. Portfolio diversification determines how assets should be diversified, not only between asset classes, but within each asset class. For example, stock and bond market investment styles include:

Stock Market Investment Styles

  • Company size ranges (large, mid, small)
  • Investment approach (value,core, growth)
  • Nationality (domestic vs. international vs. emerging market)

Bond Market Investment Styles

  • Maturity (short, intermediate, and long)
  • Quality (high, medium, or low quality)
  • Nationality (domestic vs. international vs. emerging market)

How Is The Allocation To Each Category Determined?

At times during an economic cycle, different investment styles may tend to perform better relative to another style.  Instead of keeping a static allocation to various investment styles, JIC believes it is important to maintain a flexible style allocation strategy in order to reflect changing macroeconomic, fundamental, and technical characteristics.

This approach attempts to add value by taking advantage of both style trends and manager selection. While the total allocation to a broad asset class is generally constant, the allocation within the asset class may fluctuate.