Concentrating on individual securities exposes you to uncompensated and unnecessary risks. Diversification can reduce the impact of any one company’s performance on your wealth, in turn, allowing investors to capture the returns from the broader market. It can also smooth out some of the bumps, providing an opportunity for a more stable outcome than a single security.
Diversification helps take the guesswork out of investing
It’s tough, if not impossible, to know which market segments will outperform from period to period. Attempting to identify a group of winners is a guessing game. Diversification improves the odds of holding the best performers.
Is international investing for you?
Diversification helps reduce risks that have no expected return, but diversifying only within your home market may not be enough–the US equity market rarely outperforms other developed markets. Instead, global diversification can broaden your investment opportunity set. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.