Investing in a wide variety of assets can help reduce the risk of losing significant sums if one investment category experiences a loss. There are a number of different ways to diversify your portfolio, and the mix you choose will depend on your personal preferences, risk tolerance, time frame and objectives.URL :theinvestorscentre.com

The most common form of diversification is by asset class. This means spreading your investment dollars across stocks, bonds and cash equivalents like money market funds as well as real estate through real estate investment trusts (REITs) and commodities. This approach, often referred to as an “asset allocation,” helps balance your growth potential with stability.

Diversified Investment Approaches for Stable Returns

You can also diversify within each asset class. For example, you can diversify within stocks by investing in various industries and market capitalizations, such as small-cap, value and dividend stocks. You can also diversify within a sector by investing in cyclical and non-cyclical sectors, such as technology and consumer goods or energy and utilities. This helps reduce the impact on your overall portfolio when a particular sector experiences adverse conditions, such as a recession or economic slowdown.

You can also diversify by geography, as well as within international investments, by investing in both emerging and developed markets. This can decrease the impact on your portfolio when events occurring in a country affect all markets, such as a health crisis or political instability. You can further diversify by acquiring both U.S. government and corporate bonds as well as bonds that have varying lengths of maturities.