Reducing Risk Through Diversification

Diversification is recommended for equity investors because it lowers the overall risk of a portfolio without necessarily reducing expected returns. A portfolio with a narrow focus, such as Internet stocks, may do well for a period of time. However, these stocks will eventually underperform other market segments. Since there is no way to predict which market segments will have the best future performance, it is wise to spread your investments across multiple segments. We recommend a balanced, globally diversified portfolio that includes small, mid, and large cap equities.

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