Diversify

Diversifying your portfolio means spreading your money across a range of investments.

No single type of investment will perform well in all economic conditions and though you might be tempted to try, it’s impossible to consistently predict which types of investment, geographic region or investment style will be the best at any given time.

A starting point to diversify your investments begins with the three key asset classes: cash, bonds and stocks. Each asset class has different qualities and risks which can be used to meet different financial needs. Holding a variety of investments helps reduce your risk. On average, having a balanced portfolio is more likely to keep your investments moving in the right direction: toward long-term growth.

A diverse portfolio helps you take advantage of opportunities that might otherwise be too risky.

Often, the investments that offer the biggest potential reward are the same ones that expose you to the greatest risk. If you were putting all your savings in only one investment, you would probably want to steer clear of high-risk, high-reward opportunities. But in a diverse portfolio, there is less potential harm in adding some bolder elements to the mix, especially when you keep the proportion small. If they perform poorly, your overall portfolio will not be too strongly affected. And if they thrive, you will reap the benefits.

Different investments in your portfolio may grow at different rates at different times. Having the right mix of investments helps you keep improving your overall position.