Confluence
Categories: Managed Funds, Investing
Your DNA and your partners DNA converge to make a baby. Hopefully a Gerber model. Because college is expensive.
In nature, convergence varies. When multiple bodies of water converge into one, it's called a confluence.
In the same way, a good investment advisor combines multiple strategies compatible with the client's goals and risk tolerance. Confluence results when combining different types of investments such as stocks, bonds, certificates of deposit, money markets, annuities, and so on.
Example.
Maureen is in her early 30s and is willing to take on a lot of risks, since she has plenty of time to recover if the market happens to tank.
So, her investment advisor suggests an 80/20 portfolio, where 20% is invested in fixed income bond funds with 80% going to high growth stock funds. In this way, the confluence is used to come up with a single portfolio to achieve Maureen's financial goals.
On the other hand, Ed and Sheila are in their 60s and getting ready to retire, so their confluence of strategies might be the opposite of Maureen's... a 20/80 split with 80% going to a low-risk bond fund and 20% to a growth or index funds.
Technical analysts also use the idea of confluence when they analyze multiple signals in the marketplace to identify risks and opportunities, and then make recommendations.