Diversification of Investment Risk—Seeing What Is There and What Is Not

When it comes to money, it’s easier to get obsessed than you might think. We’ve witnessed this trend with asset “bubbles,” including the Internet craze of the early 2000s and the real estate meltdown that followed eight years later. As bubbles expand, investors often gain confidence with each new success and take on greater risks. They may commit more funds to the appreciating assets, neglecting other more conservative, available investment choices. When the bubble “bursts,” they are left “naked,” with little or no options to protect the assets or recover the losses.

Fortunately, you can protect yourself from relying on just one asset class by recognizing the simple benefits of diversification.