When it comes to investing, diversification is key to managing risk and maximizing returns.
The most common investment strategy is diversifying among the three major asset classes: cash, stocks and bonds. Once you have decided on a strategy for these three investment classes, it’s important to diversify within each asset. Simply put, you shouldn’t put all your eggs into one basket.
All investments involve some trade-off between risk and return. Diversification reduces unnecessary risk by spreading your money among a variety of investments. Aside from diversification, the single most effective strategy is to invest continuously over time, with a long-term perspective.