Do asset allocation and diversification guarantee a profit?
Asset allocation and diversification do not guarantee a profit or protect against a loss. International: Investing in foreign and/or emerging market securities involves interest rate, currency exchange rate, economic, and political risks. These risks are magnified in emerging or developing markets as compared with domestic markets.
What are the benefits of diversification?
Even in a more challenging environment, assets such as cash, Treasuries, and gold have continued to provide valuable diversification benefits. While diversification doesn't work with every asset class in every market, it's still an important tool for improving risk-adjusted returns over the long haul.
Is portfolio diversification still a good idea?
Even so, the basic arguments in favor of portfolio diversification still hold. A diversified portfolio still reduced volatility and limited losses during the market downturn in early 2020, albeit maybe not as much as investors would have hoped.
Is it easier to diversify within each asset category?
Because achieving diversification can be so challenging, some investors may find it easier to diversify within each asset category through the ownership of mutual funds rather than through individual investments from each asset category.
Diversification with Correlations and Return Gaps