DIVERSIFICATION USED TO be simpler: To decrease the volatility risk inherent in stocks, you added bonds to a portfolio, mitigating swings and adding a nice income component at the same time. But with quality bonds offering a pittance in terms of yield, many investors are unimpressed by the fixed-income allocations in their portfolios. This dissatisfaction translates into pressure for financial advisors to find new ways to reduce risk without asking their clients to give up too much return potential.
Accomplishing this can require some creative thinking in terms of asset allocation, which happens to be an area of expertise for Brian Spinelli, chair of the investment committee and senior wealth advisor at Halbert Hargrove, who researches nontraditional approaches to investments. We spoke with Spinelli about areas advisors can look for unique return and diversification opportunities. Keep reading to see excerpts from that interview.