How Safe is Your Retirement?

Build a Comfortable Retirement with the Five Percent Limit.

No single growth investment should make up more than five percent of your portfolio.

That’s the level of diversification that Oxford Financial Partners believes could provide you comfort in knowing your portfolio will survive both the good times and bad.

Our five percent rule means you are going to have at least 20 different holdings at a time.

Why 20? Classic studies of diversification by Benjamin Graham in his The Intelligent Investor and the landmark study “The Effect of Diversification on Risk” by W.H. Wagner and C.S. Lau indicate that somewhere between 10–30 holdings result in a significant reduction in company-specific risk. It doesn’t vanish entirely, but it does level out. No one holding should be able to wreck the retirement portfolio.

The research assumes that if the market is up or down, those individual investments are not all moving the same way.

They are said to be “non-correlated,” meaning their returns do not move in lockstep with each other. The more you can build a portfolio of those non-correlated investments, the more your portfolio is able to smooth out the ride. As one zigs, another zags.

Want to know more?

If you would like to learn more about the five percent limit – along with practical advice for its effective implementation – download a free chapter from our book, Power of 5 Investing, titled: The 5 Percent Limit.

HubSpot Video

What's You'lL learn in this free chapter

  • The ins and outs of the Five Percent Limit and its importance
  • A reliable way to build a comfortable retirement
  • Two views of diversification and which one is right for you