SOURCE ROOM
Asset Allocation and Diversification
U.S. Securities and Exchange Commission, Investor.gov
Claims Supported by This Source
- Asset allocation is a personal decision determined by investment time horizon and risk tolerance, and it changes at different stages of life.
- Diversification is spreading money among different investments to reduce risk. It is summarized by the phrase "Don't put all your eggs in one basket."
- Diversification is enhanced by spreading investments not only across different asset classes but also among multiple securities and industries within the same class.
- Even if you own mutual funds or ETFs, it may not be diversified if their focus is narrow; it is necessary to check their top holdings.
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