See how you can benefit from diversification
In real estate, it's often said that the three most important words are location, location, location. If there are three most important words in investing, they could be diversification, diversification, diversification.
When it comes to diversifying conveniently and inexpensively, mutual funds are a good choice for many investors. A single mutual fund most likely holds more securities—at less cost—than you could ever buy on your own.
So what makes diversification such a big deal? See a 2-minute presentation that shows the potential benefits of this bedrock principle of sound investing.
- Annual stock market returns are calculated using the Standard & Poor's 500 Index from 1926 through 1970, the Dow Jones Wilshire 5000 Index from 1971 through April 22, 2005, and the MSCI US Broad Market Index thereafter.
- Annual bond market returns are calculated using the Standard & Poor's High Grade Corporate Index from 1926 through 1968, the Citigroup High Grade Index from 1969 through 1972, the Lehman Brothers U.S. Long Credit AA Index from 1973 through 1975, and the Barclays Capital U.S. Aggregate Bond Index thereafter.
- All investments are subject to risks.
- Diversification does not ensure a profit or protect against a loss in a declining market.
- Investments in bonds and bond funds are subject to interest rate, credit, and inflation risk.
- Past performance is not a guarantee of future results.
- The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.