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What is a good diversified portfolio?

Most well-diversified portfolios are a mix of stocks, bonds, and cash. And you can achieve proper diversification with just 3–5 investments. Plus, that's how several billionaire investors recommend you invest. Below is a complete overview of how to balance risk and reward, a look at asset classes, and five examples of diversified portfolios.

How do you diversify your portfolio?

As mentioned above, there are three main assets that make up the bulk of most investors' portfolios: stocks, bonds, and cash. There are two methods to diversify: For example, if you owned 100% stocks, you could diversify by investing some of that money in bonds (across asset classes).

How does diversification affect your investment portfolio?

The net effect of diversification is slow and steady performance and smoother returns, never moving up or down too quickly. That reduced volatility puts many investors at ease. The three main general asset classes in an investment portfolio are stocks, bonds and cash.

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