August 2016

At its core, diversification is deliberate uncertainty, recognizing that it is difficult to know which particular subset of an asset class, or sector is likely to outperform another. Broad diversification, done effectively, seeks to capture the returns of different types of investments over time but with less volatility at any one time. Diversification done right should produce long term returns that either outperform or reduce the risks of portfolios that are too heavily weighted in any one security, sector, or asset class. There are, however, four vital keys to effective diversification that must be understood and effectively applied to ensure long term success: