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No two investments perform the same way at the same time.
When you diversify your investments across asset classes that perform differently in the same market conditions, you can potentially offset losses (risk) in one asset category with gains (reward) in another. This could lead to greater returns over time.
Smart investors create a diversified asset allocation strategy to:
You have $10,000 to invest. Would you:
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a) | Invest all of it in one stock? |
| b) | Invest it in three stocks within the same industry? |
| c) | Invest it in four stocks across different industry sectors? |
Who knows - you may strike it rich with answer A. But would you be able to stomach a loss? How you invest your money in the market can be viewed the same way. While you can't control the market's ups and downs, you can control how you ride the waves with diversification.
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