Portfolio Diversification

Netzel Financial specializes in helping ensure portfolios are diversified in the right ways for pre-retirees and retired individuals. The traditional portfolio (60% US stocks and 40% US bonds) may not provide the diversification needed for those in their retirement years. Our clients usually want a consistent income, and we have found the traditional portfolio to be inadequate for this purpose.

Netzel Financial utilizes a model similar to the endowment model of investing. You may recognize the term “endowment model” as the type of investments that some colleges and universities use when seeking growth. This method of investing allocates a portion of investable assets into alternative or non-traditional asset classes. These alternative investment types offer options to our investors that may not be available elsewhere. Of course, we do not recommend investing in investments you do not understand, which is why we recommend having a one-on-one discussion to go over what these assets entail.

What is the Endowment Model?

The endowment model was developed at Yale University in the mid-1980s. It was designed primarily for universities to reduce exposure to traditional asset classes by investing in alternative, long-term assets. The endowment model adheres to two key principal.

  1. Generate high enough returns to allow for yearly withdrawals without dipping into principal.
  2. Augment the principal with part of the returns to address inflation concerns.

This approach has been a success for universities over the years. It has not only provided lower market risk compared to traditional growth portfolios, but often the investments have produced a significantly higher rate of return.

If you’d like to know more about our approach to portfolio diversification, call us at 480-219-0657.

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