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What Does a Balanced Portfolio Look Like?


Written by Angela Roberts

Aug 18, 2022

Sometimes, it helps to take a step back and reexamine the fundamentals of portfolio diversification. Time and again, we see mentions of a “well-diversified” or “balanced” portfolio. But what does “balanced” really mean?

Since every financial situation is unique, every portfolio will also be unique.

Finding the right balance in your portfolio doesn’t mean creating a portfolio identical to someone else’s. Your income, savings, financial goals, and level of acceptable risk exposure are all unique to you, and so your asset mix will likely be unique as well.

As a CEO, it’s important for me to understand that every person in our U.S. Money Reserve family is different, and each has unique strengths. Just as with each asset in a portfolio, the best way to get the most out of each member of our team is to understand each person as well as possible.

This is why I often say that the best decision is an educated decision, and that is why we strive to provide as much informational content about the world of precious metals as possible to both existing and would-be clients.

A balanced portfolio will look different for everyone—especially during times of economic uncertainty.

Man looking at large screen of financial information representing portfolio

As a July 15, 2022, article by Business Insider states, “To properly balance a portfolio, the first step is to understand your [diversification] goals and appetite for risk.”

Generally speaking, a balanced portfolio contains a mix of assets that may respond differently to the same economic factors while maintaining the desired level of risk exposure. For example, a portfolio entirely allocated to just stocks, even a variety of stocks, may not be considered well-balanced if all those stocks tend to rise and fall together.

A balanced portfolio may also include other paper-based assets like bonds or cash, as well as alternative assets like real estate or precious metals—because while one asset or asset class may be experiencing negative movement, another (or hopefully, several others) may be experiencing growth. The goal is to find a mix that allows for overall growth over time while managing risk according to your personal level of comfort.

But as simple as that may sound, a balanced portfolio can also look very different depending on the current economic environment.

Right now, we’re experiencing substantial uncertainty that isn’t going away anytime soon. The economic impacts of the COVID-19 pandemic are still being felt, along with soaring inflation, rising interest rates being used to try and fight that inflation, and a possible recession either on the way or already taking place.

In this sort of economic environment, balanced portfolios may lean more conservative, with consumers revisiting their allocation and including lower-risk assets. For example, on August 4, 2022, Bloomberg published an article suggesting that consumers concerned about a recession consider rebalancing their portfolios. Specifically, the article suggests an examination of a portfolio’s current level of risk and a consideration of favoring stocks in what the article calls “more stable companies,” as well as lower-risk index and exchange-traded funds. Gold could also be placed among these type of assets, as it has historically been seen as a hedge against the volatility of paper-based assets like stocks and bonds.

Balancing a portfolio isn’t a one-and-done task.

Man looking at laptop and table covered with financial documents.

Finding balance in life takes constant effort and attention. You may need to get that extra bit of work done, but you also need to get enough sleep. What works for you one week may not work the next.

The same is true of a balanced portfolio. As markets ebb and flow and different economic factors continue to impact our portfolios, a regular reassessment of our asset mix may be required. The Business Insider article mentioned above suggests monitoring a portfolio for imbalance once per year. Others may suggest a financial checkup two or more times a year, especially during times of economic uncertainty, for a more detailed view of how your particular asset mix is faring.

But once again, this often comes down to your unique level of risk tolerance. If you choose to lower your overall risk exposure with the help of safe-haven assets like gold, you may feel more comfortable checking in fewer times per year. But no matter how you choose to balance your portfolio or how many times per year you adjust that balance, it’s important to remember that a balanced portfolio often isn’t about realizing short-term gains, but long-term growth. By considering where we want to be in 5, 10, or 15 years instead of in 6 months, we may be able to better balance our portfolios and, hopefully, better realize our unique financial goals.

To learn more about the long-term power of precious metals, CLICK HERE to request a FREE copy of our Gold Information Kit.


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