You’ve probably heard the phrase “Don’t put all your eggs in one basket.” That’s essentially the idea behind diversification. It’s a risk management strategy that involves spreading your investments across different assets.
Why Diversify?
No one can predict which part of the market will perform best in a given year. By owning a variety of investments, you can help reduce the risk of a single event derailing your portfolio.
Types of Diversification:
- By Asset Class – Stocks, bonds, cash, real estate, etc.
- By Sector – Healthcare, energy, technology, etc.
- By Geography – U.S. vs. international markets
Example:
In a year when tech stocks are down, utilities or dividend-paying stocks might hold up better. The goal isn’t to eliminate risk, but to help smooth out returns over time.
At SouthShore Wealth Management, we build portfolios designed to weather different market conditions, so you don’t have to worry about picking winners and losers.
**A diversified portfolio does not assure a profit or protect against loss in a declining market. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards.
