Diversification is one of the most important factors of a successful investment portfolio.
But it can be hard to really grasp. How do you know your portfolio is diversified enough? And what exactly should you put in it?
Finance blogger Ken Faulkenberry defines investment diversification as “a portfolio strategy combining a variety of assets to reduce the overall risk of an investment portfolio.“ A basic, diversified portfolio might include several investment categories such as stocks, bond and cash.
This informative video from 1 Minute Economics explains diversification and why “putting all of your eggs in the same basket may seem like the comfortable thing to do but those who don’t diversify are putting their wealth at risk for the sake of their comfort zones… to put it mildly.”
If your portfolio isn’t diverse enough, read It’s Time to Fix Your Undiversified Portfolio.