A diversified investment is a portfolio of various assets that earns the highest return for the least risk. A typical diversified portfolio has a mixture of stocks, fixed income, and commodities. Diversification works because these assets react differently to the same economic event.
Key Takeaways
- You receive the highest return for the lowest risk with a diversified portfolio.
- For the most diversification, include a mixture of stocks, fixed income, and commodities
- Diversification works because the assets don’t correlate with each other.
- A diversified portfolio is your best defense against a financial crisis.
