Diversification

Role of Diversification in Reducing Risk:

Diversification involves spreading investments across different asset classes, sectors, and regions to reduce exposure to any single asset or risk. It helps protect your portfolio from significant losses.  

Creating a Diversified Portfolio:

1. Stocks: Include a mix of large-cap, mid-cap, and small-cap stocks.
2. Bonds: Allocate to government, corporate, and municipal bonds.
3. Real Estate: Add real estate investments for diversification.
4. Alternative Assets: Consider commodities, hedge funds, or private equity.

Adjusting Asset Allocation Based on Risk Tolerance:

Tailor your asset allocation to match your risk tolerance and investment goals. Regularly review and rebalance your portfolio to maintain the desired level of diversification.