{"id":20939,"date":"2023-11-03T22:04:03","date_gmt":"2023-11-03T22:04:03","guid":{"rendered":"https:\/\/www.thinkadvisor.com\/2023\/11\/03\/where-adding-riskier-assets-can-lower-portfolio-risk\/"},"modified":"2023-11-03T22:04:03","modified_gmt":"2023-11-03T22:04:03","slug":"how-adding-riskier-assets-can-lower-portfolio-risk","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2023\/11\/03\/how-adding-riskier-assets-can-lower-portfolio-risk\/","title":{"rendered":"How Adding Riskier Assets Can Lower Portfolio Risk"},"content":{"rendered":"
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To David Scranton, CEO of Sound Income Group, \u201cthe real magic\u201d is \u201cthe ability to get competitive returns with less risk.\u201d<\/p>\n

Scranton, in an interview with ThinkAdvisor, argues that \u201cadding a little bit of the riskier assets to a conservative portfolio can help increase your returns but lower your volatility and risk.\u201d<\/span><\/p>\n

That\u2019s been Scranton\u2019s unusual income-generating strategy for about 25 years. When he switched from a growth approach, the advisor saw his business \u201cexplode,\u201d increasing \u201c10-fold in about six years,\u201d he says.<\/span><\/p>\n

Scranton, a 2023 ThinkAdvisor LUMINARIES award finalist in Executive Leadership, focuses on boosting income with higher-dividend equity strategies and bond-like investments.<\/span><\/p>\n

That way, he\u2019s able to offer \u201cinstitutional-style money management\u201d to his target clients, \u201cmom and pop\u201d investors, as he puts it, who have, perhaps, about $100,000 of investable assets.<\/span><\/p>\n

Scranton, who hosts a radio show syndicated in 40-plus states and has been in the industry since 1987, has four businesses, with assets under management totaling $2.5 billion. Sound Income Group includes his own longtime practice, Scranton Financial Group, in Old Saybrook, Connecticut, and three companies that support other independent financial advisors with marketing, coaching, practice management, investment services and franchise opportunities.<\/span><\/p>\n

In the recent phone interview from Fort Lauderdale, Florida, where his group is based, Stanton says is dedicated to helping \u201caverage\u201d folks and is especially eager to advise baby boomers, who are \u201cmore afraid of financial death \u2013 running out of money \u2013 than physical death.\u201d<\/span><\/p>\n

Here are highlights of our interview: <\/span><\/p>\n

THINKADVISOR: What\u2019s your investment strategy?<\/b><\/p>\n

Income permeates everything we do. It\u2019s our overall theme. <\/span><\/p>\n

If you\u2019re in the stock market, it\u2019s higher-dividend equity strategies. <\/span><\/p>\n

We also do a lot of bonds and preferreds, and real estate investment trusts.<\/span><\/p>\n

If you go from stocks to bonds, it lowers your risk. If you go from growth stocks to high-dividend stocks, it lowers your risk. <\/span><\/p>\n

So income helps lower your volatility, but it doesn\u2019t necessarily mean a reduced return.<\/span><\/p>\n

That\u2019s the real magic: the ability to get competitive returns with less risk.<\/span><\/p>\n

How does that happen?<\/b><\/p>\n

There\u2019s a point where adding a little bit of the riskier assets to a conservative portfolio can actually help increase your return but lower your volatility and risk.<\/span><\/p>\n

My theory, going back 25 years, being a specialist in bonds, was that if I added bond-like equities to a bond portfolio, it would have the same result as adding regular equities and increase my return [via] risk. <\/span><\/p>\n

And that\u2019s exactly what we\u2019ve proven to work successfully for clients.<\/span><\/p>\n

When I talk about bond-like equities or bond-like stocks, I mean business development companies and REITs. They\u2019re bond-like stocks because of what\u2019s in them.<\/span><\/p>\n

By adding a little bit of that to a portfolio of bonds and preferreds, we can actually increase the return \u2013 the income payment \u2013 and decrease the risk.<\/span><\/p>\n

What\u2019s the main benefit for advisors? <\/b><\/p>\n

Baby boomers need more income, but the majority of financial advisors are growth-based and don\u2019t focus on income. Most of them are focusing on total return irrespective of whether it comes from growth or income.<\/span><\/p>\n

But baby boomers are getting older and older, and recent studies have shown that they\u2019re more afraid of financial death \u2014 <\/i>running out of money \u2014 <\/i>than physical death. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

To David Scranton, CEO of Sound Income Group, \u201cthe real magic\u201d is \u201cthe ability to get competitive returns with less risk.\u201d Scranton, in an interview with ThinkAdvisor, argues that \u201cadding a little bit of...<\/p>\n","protected":false},"author":1,"featured_media":20940,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[1],"jetpack_featured_media_url":"https:\/\/blog.lifeinsurance-orleans.ca\/wp-content\/uploads\/2023\/11\/how-adding-riskier-assets-can-lower-portfolio-risk.jpg","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/20939"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=20939"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/20939\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media\/20940"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=20939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=20939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=20939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}