Portfolio Diversification
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A well diversified portfolio can balance weak performance in one investment
with good performance in another, increasing return potential and reducing
risk.
Non-Diversified Portfolio
$100,000 placed in a single investment earning 5% a year for
20 years, with no other changes to principle. |
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Diversified Portfolio
The same $100,000 split into five $20,000 investments, each
earning a different rate of return, (in one case, showing a loss), for the
same 20 year period. |
Total return for particular period is the ending redeemable value of initial
investment at the end of the period shown, assuming annual reinvestments of all
income during the period. The returns shown are hypothetical and do not
represent the returns of any particular investment or investments. Actual
returns on any particular investment will depend on the particular market and
risks applicable to that investment.
Asset allocation and diversification does not guarantee a profit or protect against a loss. All investing involves risk, including the potential loss of principle.
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