What is a diversified investment?

Owning a variety of stocks, bonds, real estate, or any other type of asset may make you a diversified investor. Diversification may be able to manage the risk of loss that can take place by overexposure to any one asset class or security. Spreading your dollars among—and within— different asset classes may help even out market fluctuations.

A diversified investment portfolio is built for long-term holding. An individual investor’s diversification may depend on factors such as his or her risk tolerance and objectives, and the investment time horizon. Many retail investors work with advisors to accumulate the appropriate combination of assets.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.


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