Stay diversified across different asset classes from "summary" of Investing Simplified by Chuck Price
Diversification is a key principle in investing. It means spreading your money across different types of investments to reduce risk. By diversifying across different asset classes, you can protect your portfolio from the ups and downs of any one market. Each asset class has its own risk and return characteristics. For example, stocks tend to have higher returns but also higher volatility, while bonds are typically more stable but offer lower returns. By holding a mix of stocks, bonds, real estate, and other assets, you can balance out the risks and rewards. Asset allocation is the process of deciding how much of your portfolio to allocate to each asset class. This will depend on your goals, risk tolerance, and time horizon. Younger investors may be able to take on more risk and allocate a larger portion of their portfolio to stocks, while older investors may want to be more conservative and hold more bonds. Rebalancing is the practice of periodically adjusting your portfolio back to its target allocation. For example, if stocks have performed well and now make up a larger percentage of your portfolio than you intended, you may sell some stocks and buy more bonds to rebalance. Diversification is not a guarantee against losses, but it can help reduce the impact of market volatility on your portfolio. By staying diversified across different asset classes, you can improve your chances of achieving your investment goals over the long term.Similar Posts
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