Market Correlation

We've all heard the old saying "don't put all of your eggs in one basket", because let's face it, if you drop that basket there goes most of your eggs.  The world of investing has summarized that saying in one word "diversification". It seems like any time you read articles on financial planning or investing, you see it. While diversification is a principle that most good financial advisors will use. Sometimes it gives us a false sense of safety. For example, just because someone invests in hundreds of different stocks, it doesn't mean that they have eliminated all of their risk. If the stock market has a major setback, that portfolio will experience the same set back and their portfolio could suffer as a result. It is important that you look at your investments' correlation to the overall markets, and to other investments that you hold. This could be especially important for income portfolios where growth is not the main factor, but portfolio stability and income is. As always its a good idea to speak to a trusted financial professional about your financial goals and needs before attempting any investment.