At a Glance —
- Diversification of your investment portfolio is a key strategy to help minimize risk
- Diversification is planned variation of investments across multiple asset classes and industry sectors
- By diversifying, you increase the likelihood that select investments will perform well when others may not
- Investing in a wide variety of investment vehicles helps to mitigate risk without sacrificing opportunity, resulting in less exposure to any one security or sector
Diversification is an important strategy for all investors to consider. It is essentially the process of spreading your investment dollars across a wide variety of investment options so you are not overly exposed in any single asset class. With a solid diversification strategy, you can minimize the risk of losing value in your portfolio, maximizing wealth preservation and supporting growth potential.
When building your portfolio, consider a healthy mix of investment types across a wide variety of sectors and geographies — this will help you insulate from volatility and losses. Various investments respond differently to economic and geo-policitcal events. Some investment assets may fall in value and others escalate as a result of market shifts, allowing you to improve potential returns and stabilize the overall performance of your investment portfolio.
Bottom line —
Diversification is an important strategy every investor should consider. By diversifying your portfolio and spreading your investments across various investment vehicles and asset classes, you reduce the risk of losing money on a single security or market sector as well as properly support growth objectives. You will also increase the likelihood that at least some of your investment vehicles will perform well even when others do not.
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