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Diversification

What is Diversification?

Diversification is a risk management technique to spread our your risk across many different options — basically a way of saying “Don’t Put All Your Eggs in One Basket”.

For example:

  • Investment Diversification — buying funds with many stocks instead of buying individual stocks.
  • Asset Diversification — buying different asset classes like stocks, bonds, real estate, commodities, cash, etc.
  • Income Diversification – not relying on only one source of income like a job, and have multiple streams of income (e.g., investment income, rental income, side hustles, etc.)

How to Start Investing in Stocks for Beginners

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Investing Decisions Tree

Investing in the stock market is one of the most accessible and reliable ways to build wealth and generate passive income. It is statistically possible, to invest $100 a month and become a millionaire by the time you turn 65. Regardless of when you start and how much money you can invest, there is something … Read more

Income Diversification: Building and Shifting Your Income Streams

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Income Diversification: Building and Shifting Your Income Streams 1

Diversification is a concept that I’ve embraced all my life.  In the past, I discussed investment diversification and also touched on the idea of income diversification.  When you think about income…what comes to mind? Most of us will immediately think about our full-time job, and maybe a part-time job. When you invest, you diversify across … Read more

Tax Diversification — Why It Pays to Tax Diversify

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Tax Diversification -- Why It Pays to Tax Diversify 13

We hear a lot about diversifying across asset classes — owning stocks, bonds, real estate, etc. We also hear a lot about diversifying within asset classes — owning mutual funds of hundreds of stocks rather than owning a few individual stocks. But there’s another, lesser-known form of diversification from which you could benefit: Tax diversification. … Read more

Correlation of Returns: The Reason Why Diversification Didn’t Work

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Correlation of Returns: The Reason Why Diversification Didn't Work 16

None of the alternative investments provided sufficient risk reduction to soften the impact of the Bear Market. Alternatives such as Commodities, Equity REITS, International Equities doesn’t seem to be working. The U.S. Treasuries were one of the few asset classes that really provided sufficient diversification. What went wrong? First let’s address the question of “Diversification … Read more

Low Cost Diversification With Vanguard Total World Stock ETF (VT)?

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In this Ask The Expert With Larry Swedroe article, the reader, Murali, is wondering if she could use the Vanguard Total World Stock ETF (VT) to simplify and diversify her investment portfolio.  Vanguard is known for its high quality and low cost investment products, and the Total World Stock ETF should provide most of the … Read more