Risk & Diversification
Key Takeaway
Spread investments across asset types and geographies to reduce risk without sacrificing long-term returns.
Understanding Risk
In investing, risk generally means volatility: the possibility that your investments go down in value in any given period. Higher-risk investments tend to offer higher potential returns over long periods, but with more ups and downs along the way.
Why Diversify?
Diversification means spreading your investments across different asset types, geographies, and sectors. When one investment goes down, others may go up, smoothing out your overall returns. A well-diversified portfolio reduces risk without necessarily reducing long-term returns.
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