What is a diversified portfolio example?

Here's a diversified portfolio example that shows how diversification might look in your own portfolio. A commonly used option for passive investors is an ETF or mutual fund based on the S&P 500 index, a broadly diversified stock index of 500 large, industry-leading American companies.

What is diversification & how does it work?

Diversification includes owning stocks from several different industries, countries, and risk profiles, as well as other investments such as bonds, commodities, and real estate. These various assets work together to reduce an investor's risk of a permanent loss of capital and their portfolio's overall volatility.

Should you diversify your portfolio in retirement?

Once you've entered retirement, a large portion of your portfolio should be in more stable, lower-risk investments that can potentially generate income. But even in retirement, diversification is key to helping you manage risk. At this point in your life, your biggest risk is outliving your assets.

Does naive diversification reduce portfolio risk?

Naive diversification is simply not as sophisticated as diversification methods that use statistical modeling. However, when dictated by experience, careful examination of each security, and common sense, naive diversification is nonetheless a proven effective strategy for reducing portfolio risk.