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What are some advantages of a diversified investment portfolio?

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Quick Answer

There are three main advantages of a diversified investment portfolio: it helps manage risk, it helps investors avoid costly mistakes by adopting a comfortable risk level and it allows for rebalancing, which is the key to maintaining risk levels over time. Diversification doesn't ensure overall gains, but it can help improve gains at the investor's risk level.

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Full Answer

Most investors are tempted to check their portfolios when the market is up and when it is down. However, financial advisers believe that the best strategy is to decide on a risk level and schedule regular checkups as part of the strategy. Regular checkups usually occur once a year or when an investor goes through a big life change, such as a new job, getting married or a large bonus.

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