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Asset Allocation and Diversification

U.S. Securities and Exchange Commission, Investor.gov

Claims Supported by This Source

  1. Asset allocation is a personal decision determined by investment time horizon and risk tolerance, and it changes at different stages of life.
  2. 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."
  3. Diversification is enhanced by spreading investments not only across different asset classes but also among multiple securities and industries within the same class.
  4. 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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