The most important factor in predicting what kinds of returns an investment portfolio is likely to achieve is not the individual securities or funds it contains but rather the kinds of securities it contains. The Asset Classes in a portfolio largely determine its returns. What do we mean by Asset Classes? Well, first there are two major classes of investment assets – Stocks and Bonds. Within each of those, there are a number of other classes and sub-categories. Stock Classes Stocks, Stock … [Read more...]
What Is Diversification?
You'll hear Investment Advisors (including me) talk a lot about the benefits of Diversification. But what is Diversification? Simply put, it's not putting all your investment eggs in one basket, but spreading them out over a number of different baskets. That concept applies to both asset classes and investments within an asset class. An Asset is anything that produces income or can be purchased and sold, such as stocks, bonds, or certificates of deposit (CDs). Asset classes are groupings … [Read more...]