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Diversify your investments from "summary" of The Little Book of Common Sense Investing by John C. Bogle
Diversification is the bedrock principle of investing. It is the one concept that every investor should understand and embrace. By spreading your investments across a variety of different asset classes, you can reduce the risk of your portfolio and increase the likelihood of achieving your financial goals. The idea behind diversification is simple: don't put all your eggs in one basket. By investing in a mix of stocks, bonds, real estate, and other assets, you can protect yourself from the ups and downs of any one market. This way, if one sector is performing poorly, you still have other investments that may be doing well. Diversification can also help you capture the returns of different asset classes over time. While stocks may outperform bonds in some years, the opposite may be true in others. By holding a mix of assets, you can benefit from the growth potential of stocks while also enjoying the stability of bonds. Another benefit of diversification is that it can help smooth out the overall volatility of your portfolio. While individual investments may experience significant price swings, a diversified portfolio is likely to be more stable over time. This can give you peace of mind and help you stay the course during turbulent market conditions. It's important to note that diversification does not guarantee a profit or protect against loss. However, by spreading your investments across a variety of different assets, you can increase the likelihood of achieving your financial goals while minimizing risk. So remember, don't put all your eggs in one basket – diversify your investments and set yourself up for long-term success.
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