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49

This seems to me irregular both in terms of risk, lack of diversification Me too. Is this a suitable allocation of assets? Putting 50% in one stock is acceptable, I think, if that one stock is a highly diversified and well-run investment company like Berkshire-Hathaway. (Apparently, half of Bill Gates' wealth is in B-H.) Of course, a giant bank isn't ...


13

what else is wrong with focusing on less developed markets exclusively? Less developed markets are risky, because they're volatile and prone to high inflation. That means you can lose a lot of money. What am I missing? The debt burden isn't as bad as you think it is. If the developed Western economies crash, everyone else's will too.


9

Yes, this is terrible in terms of lack of diversification and concentrated risk. Conflict of interest? No, because there's no benefit to Morgan Stanley if a client owns shares of JPM. Mismanagement? Maybe, maybe not. This might be a violation of FINRA's "Know Your Client Rule" which requires a broker to assess each customer's financial situation, ...


5

Given the capital gains basis on the stock, it would be practical for her to continue to hold it. It is potentially possible that JPM grow so much over the past 10 years that it went from a moderately weighted position (10-15%) to 50% and was not sold for tax reasons. With that in mind it is hard to tell if this is mismanagement as the adviser could be ...


4

Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Full Definition ...


4

A general rule of investing is that as you get older, you reduce your market exposure. Traditionally, advisers have used the “100 minus your age” rule, which is the percentage of your assets that you should allocate to equities. The older you get, the more you should shift toward fixed income, thereby reducing the volatility and risk of your portfolio. ...


3

This depends how you define risk. In the sense your portfolio will be substantially less diverse and likely more volatile, this is indeed more risky. What you suggest is a form of timing the market, by weighing more heavily into sectors you consider undervalued and less into those you see as overvalued at the time. Then readjusting later based on what ...


2

Short answers to your short questions: What is the "true" definition of a diversified portfolio Diversification in the inclusion of partially correlated assets in a portfolio in order to reduce risk (volatility). why is it better? "better" is relative, but it's "better" than the alternative in investing in a single asset (or two perfectly correlated ...


2

Congrats on the great equity gain there. Not sure if I'll be able to help much but here are some suggestions/things to think about. (1) Why are you focused on dividend paying stocks? This seems like it would increase your capital gains taxes. See Berkshire Hathaway strategy. Consider moving your investments to ones that pay fewer dividends, or ones that ...


2

(Short term -- less than a year or two -- money should be in savings account.) The purpose of keeping the money in a conservative portfolio is so that you don't have to sell low. Here's an example: $25K is 31.25% of the $80K in your investment accounts. If the market drops 50% like it did 12 years ago, you'd have $40K remaining. $25K is 62.5% of $40K. ...


1

There is the question of what your mother's tax bracket is. If it's low, you might want to slowly rebalance the portfolio, i.e., sell a small portion of the JPM each year. This will generate a tax hit, with the offsetting benefit that you will be increasing the diversification of her portfolio. Don't forget that these are long term capital gains we're ...


1

Is this a suitable allocation of assets? All allocation of assets are of course up to the investor, the risks they are willing to take and the companies they want to support. To me it looks like borderline mismanagement, but I'm willing to be convinced otherwise. This is definitely strange, but large corporations are fairly stable. And $3.5M is a lot. ...


1

I'm 62, getting ready for retirement, and in a similar situation. I worked for a dozen years at Microsoft, purchasing ESPP, getting stock grants, etc. My stay there nearly exactly coincided with Steve Ballmer's turn at CEO. During that time (except a large drop right after I started and a dip/recovery in 2008-2009), the stock remained completely flat. ...


1

Your index funds may be more geographically diversified than you think, since many companies that are based in the US (for example) actually derive a lot of their business from emerging markets. One admittedly extreme example is Coca-Cola: Coca-Cola is one of the most globally active international companies, deriving 80 percent of its sales from outside ...


1

A few tidbits of advice regarding target funds: If you want to shift the risk/reward with target funds you can always buy one a few years later or earlier than your retirement date. The further out the date the less conservative it will be (to a point). Nothing says you have to pick the year you actually plan to retire. Target funds are more actively ...


1

A benefit of post-tax 401k contributions that isn't mentioned in the other answers: Your plan might allow (as at least some Fidelity plans do) an in-plan conversion of post-tax 401k balances to Roth 401k balances (whereas it might not allow rolling over to a Roth IRA via in-service withdrawals). Only the earnings on the post-tax contributions at the time of ...


1

Retirement portfolios have two phases: an accumulating phase where you are saving money and a consumption phase where you are using up the saved money. During the accumulating phase you are saving money every month and you are looking for the greatest growth possible. This is achieved by having a stock heavy portfolio with a few or no bonds. Since this ...


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