"Overweighting the strong sectors and avoiding poor performers
consistently outperforms the broad S&P500 market index."
A portfolio design strategy should
reduce exposure to risk by combining a variety of investments, such as
stocks, bonds, and real estate, which are unlikely to all move in the
same direction. The goal of diversification is to reduce the risk in a
portfolio. Volatility is limited by the fact that not all asset
classes or industries or individual companies move up and down in
value at the same time or at the same rate. Diversification reduces
both the upside and downside potential and allows for more consistent
performance under a wide range of economic conditions. |
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