Diversification matters. Here’s a simple explanation … basically you want many different baskets (asset allocation) with many different eggs (diversification) within each basket.
Everyone has an allocation, even by accident, when they hold different kinds of investments. Most people don’t have an effective diversification because the mix of those investments hasn’t been done efficiently.
Asset allocation is the broad concept that should target your risk, while diversification is a bit more complicated to apply some math principles to do it right.
The below short slide show illustrates the concepts in simple terms visually.
Other prior blogs on diversification.
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