Without really meaning to, I had Sushi every day this week – and while it is certainly delicious, a friend of mine seemed rather alarmed by the amount of fish I had consumed and suggested I make a point of diversifying my meals next week.

 

Being someone who has always strived to eat and be healthy, I immediately googled “is eating too much fish bad?” and came across a great article outlining 8 Health Foods that are harmful if you eat too much – click here to read further. The 8 foods on this list are all incredibly healthy – however “just because something is healthy in small amounts, it does not mean that large amounts are even healthier”. The very same logic can be applied to your portfolio and is the basis for why diversification is such a critical key to successful investing.

 

As defined by Investopedia, ‘diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio….Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated’.

 

Because diversification is such an important pillar of my investment philosophy, the most recent issue of our Portfolio Advisor newsletter this quarter covers “Everything you ever wanted to know about diversifying your portfolio…but were too afraid to ask”.

 

Click here to download the full article and to read further about the four ways to diversify your investment portfolio and debunking 3 of the most common diversification myths out there to help you build your wealth and protect against risk in good markets and volatile ones.