We diversify investment portfolios over at least 8-10 different asset categories.

Allocating money to different equity classes has the potential to both increase the annual return and lower volatility. Many financial advisors attempt to pick the asset category they believe will perform the best each year, and put most of their eggs in that basket. Studies have consistently shown that no one has been able to do this successfully over time.

Diversification does not ensure a profit or protect against loss in a declining market.