Diversification, the backbone of modern portfolio theory, is now almost a rule of thumb in the investing world. This concept, however, wasn’t always as widely practiced as it is now. In fact, Harry Markowitz and the rest of the team that developed the concept during the 1950’s went on to win a Nobel prize for the idea in 1990.
The concept is simple: if you spread your investments out over a wide range of stocks, bonds, and other types of investments, you will still see a good return on your investment with a lower chance of losing a large portion of your investment in the long term. The less tolerant to risk you are, the better it is to diversify to protect your assets from short fluctuations in the market.
Below are some of our best tips to maximizing your returns while lowering risk.