Why Portfolio Diversification Is A Critical Component Of Investing


One of the essential things you can do when it comes to investing is diversify your portfolio. By spreading your money out among different types of investments, you reduce your risk if one of those investments fails.

Today, we will discuss the importance of portfolio diversification and how it can help you reach your financial goals!

What Is Diversification?


A diversified investment portfolio is one in which you have an array of different asset classes. Asset classes are income-producing investments that are of the same primary type. 

Fixed income investments such as Treasury bonds, T-bills, state and local government bonds, corporate bonds, bond funds, I-Bonds, and cash equivalents are another asset class. There are also short-term investments, such as money market accounts or certificates of deposit.

Why Is Diversification Important?


First, as the old expression goes, you never want to put all your eggs in one basket. In other words, you never want to put all your money in one stock. If things go well, you can make a profit.

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