PRINCIPLE 7: DIVERSIFY YOUR PORTFOLIO
Diversification through prudent asset allocation among the various funds and other investment assets can help you ride out the bumps in the road. Diversification works because the different investment assets classes have different fundamental characteristics and can move in different directions. For example, when the economy is faltering and interest rates are falling, bonds will usually outperform, whereas when the economy is booming, equities will generally outperform bonds. Diversification increases returns while lowering risks, which is why it is the single most important part of your overall investment strategy.

 

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