Even if you’re new to investing, you may already know some of the most fundamental principles of sound investing. You’re probably familiar with the saying ‘don’t put all your eggs in one basket.’ By diversifying, you can reduce the risk of losing all of your eggs on any given day.

Asset Allocation 101

Asset allocation involves dividing an investment portfolio among different asset classes. Market conditions that cause one asset class to do well often cause another asset class to have average or poor returns. By investing in more than one asset class and category, you’ll reduce risk.

Diversification

The practice of spreading money among different investments to reduce risk is known as diversification. Your portfolio should be diversified at two levels: between asset classes and asset categories. The key is to identify investments in segments of each asset category that may perform differently under different market conditions.

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