What is a diversified stock portfolio?

A diversified stock portfolio will hold stocks across most GICS sectors. Diversification across stock sectors helps to mitigate idiosyncratic or unsystematic risks caused by factors affecting specific industries or companies within an industry. Sector indexes can be used by investors seeking to invest in the growth prospects of a single sector.

How to build a diversified portfolio?

A look at how to build a diversified portfolio. Invest in at least 25 stocks from various industries or an index fund for quick diversification. Include fixed-income assets like bonds to lower volatility and reduce risk in your portfolio. Add real estate through REITs to potentially increase returns and further reduce portfolio volatility.

What is an example of a diversified portfolio?

For example, a portfolio with 55% stocks, 35% bonds, and 10% REITs has historically outperformed a 60% stock/40% bond portfolio with only slightly more volatility while matching the returns of an 80% stock/20% bond portfolio with less volatility. Diversification is about tradeoffs.