Should you invest in a diversified portfolio?

You want to own assets with uncorrelated performance, so everything in your portfolio isn't going up or down at the same time. Most well-diversified portfolios are a mix of stocks, bonds, and cash. And you can achieve proper diversification with just 3–5 investments. Plus, that's how several billionaire investors recommend you invest.

What is a diversified portfolio?

Thanks to a wide array of asset classes to choose from, true portfolio diversification lies within exchange-traded funds, or ETFs. One of the most counterintuitive yet crucial concepts in investing is diversification.

How can diversification be achieved in a portfolio?

Diversification can also be achieved by purchasing investments in different countries, industries, sizes of companies, or term lengths for income-generating investments. The quality of diversification in a portfolio is most often measured by analyzing the correlation coefficient of pairs of assets.