The Importance of Diversification in Investing

Diversification is a key principle in investing, and it's especially important in today's uncertain economic climate. By spreading your investments across a range of asset classes, sectors, and regions, you can help to reduce the overall risk of your portfolio.

One way to diversify your investments is to allocate your assets across different asset classes, such as stocks, bonds, and cash. This can help to balance out the risks and potential returns of each asset class. For example, stocks are generally more volatile than bonds, but they also have the potential for higher returns over the long term. By including both in your portfolio, you can potentially mitigate the impact of market fluctuations on your overall investments.

Another way to diversify is to invest in a range of sectors, such as technology, healthcare, and finance. This can help to reduce the impact of economic downturns in any one sector on your portfolio.

Geographic diversification is another important factor to consider. By investing in a variety of countries and regions, you can help to reduce the risk of economic and political instability in any one location.

It's also important to remember that diversification does not guarantee a profit or protect against loss. However, it can be an effective tool in managing risk and maximizing your potential returns over the long term.

As you consider your investment strategy, be sure to take the time to understand the various options available to you and the risks and potential rewards associated with each. By diversifying your investments, you can help to build a strong, balanced portfolio that can weather market fluctuations and help you achieve your financial goals.

Example of Diversification

Imagine that you have a portfolio of $100,000 that consists solely of stocks in a single company. If that company experiences financial trouble or the stock market as a whole takes a downturn, the value of your portfolio could drop significantly.

On the other hand, if you diversify your portfolio by allocating a portion of your assets to other asset classes, such as bonds and cash, and investing in a variety of sectors and regions, the impact of any one investment on your overall portfolio could be lessened.

For example, you might allocate $50,000 to stocks, $30,000 to bonds, and $20,000 to cash. Within your stock allocation, you might invest in a range of sectors, such as technology, healthcare, and finance. You might also invest in international stocks, giving you geographic diversification.

In this scenario, if the company in which you have the majority of your stocks experiences financial trouble, the impact on your overall portfolio would be lessened by the other asset classes and investments in your portfolio. Diversification can help to mitigate the risk of any one investment or market event having a significant impact on your portfolio.

Best Mutual Funds for 2019 and 2020

The best mutual funds to buy for 2019 and 2020 will contain a various set of types. Smart, passive, and active investors don't try to time the market by jumping in and out of investments in the short-term. We should instead employ a buy and hold strategy for periods of more than one year. With this investing thinking in mind, we can define funds which are the best mutual funds to buy and hold for 2019 and 2020.

Typically, when we choose the best funds to buys, investors are smart to choose among the top low-cost, no-load funds (mutual funds, exchange traded funds, or closed end funds). Investors are interested in long run for higher returns.

Way to Choose the Best Mutual Funds for Long Term

This website has successful to diversify the best mutual funds selections:

• Always diversify selections. Selections may include bond funds, stock funds, and international stock funds.
• Choose low cost index mutual funds if available .These index funds typically has low expense ratio fees.
• Don’t choose best mutual funds because of the fund manager. Sometimes the best of portfolio managers know that they may perform below market averages like their indices.

Coffeehouse Portfolio

Coffeehouse portfolio is popularized by Bill Schultheis. He mentioned the portfolio in his book, The Coffeehouse Investor.

This lazy portfolio is a buy-and-hold portfolio that contains a healthy allocation to US stocks, international stocks, REIT, and bonds.

Who Is Bill Schultheis?

Bill Schultheis is an author and financial adviser. He is also a bogleheads.org reading list author. He wrote a book which titled

Vanguard Growth ETF (VUG)

Vanguard Growth ETF (VUG) is an index stock ETF (Exchange Traded Fund). This Vanguard ETF invests in US stocks of large cap companies.

This ETF's objective is to provide investment results that, before expenses, correspond the performance of the CRSP US Large Cap Growth Index.. This index fund provides a convenient way to match the performance of many of the nation’s largest growth stocks. Please check with your brokerage for additional commission.

VUG Fund Details

• Fund Inception Date: May 04, 1995
• Ticker Symbol: VUG
• CUSIP: 922908736
• Rank in category (YTD): 56%
• Category: Large Growth
• Yield: 1.30%
• Capital Gains: -
• Expense Ratio: 0.06%
• Total Assets: $ 28.61 billion
• Annual Turnover Rate: 21%

SPDR S&P MidCap 400 ETF (MDY)

SPDR S&P MidCap 400 ETF (MDY) is an index stock ETF (Exchange Traded Fund). This SPDR ETF invests in US stocks of mid-sized companies.

This ETF's objective is to provide investment results that, before expenses, correspond generally to the price and yield performance of  the S&P MidCap 400 Index. The index are companies with market cap in the range of US$ 1 billion to US$ 4.5 billion. Please check with your brokerage for additional commission.

MDY Fund Details

• Fund Inception Date: May 04, 1995
• Ticker Symbol: MDY
• CUSIP: 78467Y107
• Rank in category (YTD): 56%
• Category: Mid-Cap Blend
• Yield: 1.26%
• Capital Gains: -
• Expense Ratio: 0.25%
• Total Assets: $ 18.79 billion
• Annual Turnover Rate: 21%

Vanguard Short-Term Bond ETF (BSV)

This Vanguard Short-Term Bond ETF (BSV) is a popular short term fixed income exchange traded fund. Offered by Vanguard Group, this ETF provide decent yield for income.

This Vanguard fund seeks to track the performance of the Barclays U.S. 1-5 Year Government/ Credit Float Adjusted Index. This exchange traded fund follows a passively managed, index sampling approach.

BSV Fund Profile

• Fund Inception Date: 04/03/2007
• Ticker Symbol: BSV
• CUSIP: 921937827
• Rank in category (YTD): check
• Category: Short-Term Bond
• Yield: 1.51%
• Capital Gains: -
• Expense Ratio: 0.07%
• Total Assets: $ 21.93 billion
• Annual Turnover Rate: 0%

Updated June 2017

Morningstar analysts rank this fund with 3-stars rating. The benchmark is Spliced Barclays US Aggregate float Adjusted Index. The expense ratio is only 0.07% per year. This fee is 88% lower than the average expense ratio of funds with similar holdings.

Core Four Portfolio

Core four portfolio is popularized by Rick Ferri. He mentioned the portfolio on Boglehead Forum.
This lazy portfolio is a buy-and-hold portfolio that contains a healthy allocation to US stocks, international stocks, REIT, and bonds.

Who Is Rick Ferri?

Rick Ferri, also known as Richard Ferri, is a financial analyst, author, speaker, former adviser, and founder of Portfolio Solutions, LLC. He has written various financial articles.

Rules Of Core Four Portfolio

The rules of Core Four Portfolio is simple. It invests its 60% allocation to stocks and 40% to bonds. It mainly invest in US, international stock, REIT, and bond market.

This 4 fund portfolio is well like by followers in Bogleheads.

The portfolio can be applied with an investment in a low cost US total stock market index fund, along with direct investments in US, international stock, REIT, and bond market. It can also be implemented with low-cost ETFs (exchange-traded funds).

How to Invest

You can invest in this Core Four portfolio through Vanguard mutual funds or Vanguard ETFs (Exchange Traded Funds).