Asset Allocation Diversification

This strategy is often combined with the buy and hold approach. Many different types of risk, such as company risk, can be reduced or eliminated through diversification. Numerous studies have proven that asset allocation is one of the key factors in investment return, especially over longer periods of time.

The right combination of stocks, bonds, and cash can allow a portfolio to grow with much less risk and volatility than a portfolio that is invested completely in stocks. Diversification works partly because when one asset class is performing poorly, another is usually doing well.