![]() Money market funds are conservative investments that offer stability and easy access to your money, ideal for those looking to preserve principal. These include money market funds and short-term CDs (certificates of deposit). However, note that some fixed income investments, like high-yield bonds and certain international bonds, can offer much higher yields, albeit with more risk. These investors may have to accept lower long-term returns, as many bonds-especially high-quality issues-generally don't offer returns as high as stocks over the long term. Investors who are more focused on safety than growth often favor US Treasury or other high-quality bonds, while reducing their exposure to stocks. ![]() They can also act as a cushion against the unpredictable ups and downs of the stock market, as they often behave differently than stocks. Most bonds provide regular interest income and are generally considered to be less volatile than stocks. Because stocks are generally more volatile than other types of assets, your investment in a stock could be worth less if and when you decide to sell it. However, this greater potential for growth carries a greater risk, particularly in the short term. Stocks represent the most aggressive portion of your portfolio and provide the opportunity for higher growth over the long term. The 4 primary components of a diversified portfolio Remember, diversification does not ensure a profit or guarantee against loss. Diversification can help mitigate the risk and volatility in your portfolio, potentially reducing the number and severity of stomach-churning ups and downs. This strategy has many different ways of combining assets, but at its root is the simple idea of spreading your portfolio across several asset classes. One way to balance risk and reward in your investment portfolio is to diversify your assets. Conversely, if you invest too aggressively when you're older, you could leave your savings exposed to market volatility, which could erode the value of your assets at an age when you have fewer opportunities to recoup your losses. Invest your retirement nest egg too conservatively at a young age, and you run a twofold risk: (1) that the growth rate of your investments won't keep pace with inflation, and (2) your investments may not grow to an amount you need to retire with. One of the keys to successful investing is learning how to balance your comfort level with risk against your time horizon. This practice is designed to help reduce the volatility of your portfolio over time. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. There are no guarantees that working with an adviser will yield positive returns. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). All investing involves risk, including loss of principal. This is not an offer to buy or sell any security or interest. We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. Securities and Exchange Commission as an investment adviser. SmartAsset Advisors, LLC ("SmartAsset"), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S.
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