Personal Finance
What is Diversification?
Diversification involves spreading investments across securities or asset classes to reduce dependence on a single category. This can help optimize investment performance in volatile markets.
Charting a steady course
The table below shows how multiple stock and bond indexes performed over 10 years. While it’s tempting to chase categories with double-digit gains, note that many of those same categories experienced double-digit losses in other years. The white boxes show how a diversified portfolio with a 60% stock/40% bond allocation performed each year over the 10‑year period. The diversified portfolio had only two years of negative performance and still outperformed many other sectors in those down years.
NO ONE CAN PREDICT WHICH ASSET CLASSES WILL BE IN FAVOR
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