Investors can build a diversified portfolio of investments by applying a number of strategies when choosing what to invest in and how much to put in. These strategies can be applied alone or in tandem to one another.
Diversifying across different asset classes is considered to be the most important strategy that an investor can adopt. With carefully chosen levels of investment in each asset type you could reduce the risk of holding too many investments in each class and achieve more robust returns.
Global or geographical diversification is also a popular way of diversifying, as historically different regions do not always correlate in terms of performance.
Investors can also seek diversification by picking different types of investments within individual asset classes. For example when picking stock market investments, you may choose companies from a variety of sectors or you may choose companies likely to deliver different levels of return over different time periods.
Diversifying across different asset classes is considered to be the most important strategy that an investor can adopt. With carefully chosen levels of investment in each asset type you could reduce the risk of holding too many investments in each class and achieve more robust returns.
Global or geographical diversification is also a popular way of diversifying, as historically different regions do not always correlate in terms of performance.
Investors can also seek diversification by picking different types of investments within individual asset classes. For example when picking stock market investments, you may choose companies from a variety of sectors or you may choose companies likely to deliver different levels of return over different time periods.
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