If you’ve ever heard “don’t put all your eggs in one basket”, it’s used to describe a simple investing principle known as diversification.
What Is Diversification?
Diversification is a way to lower risk by allocating your portfolio across various investments and asset classes. In doing so, it should limit your losses and lower volatility while still providing the best possible return for your money.
Diversification is the heart of many asset allocation models. When used correctly, it will help you reach your financial goals without taking on undo risk.
Why You Diversify
The purpose of all this is to reduce investment risk and prevent losses. You do this by dividing your portfolio among different assets classes – stocks, bonds, real estate, cash, and other investments. Continue Reading…