Why should investors care about broad portfolio diversification? For many good reasons. Investing is not simply about the stock market. Instead, capital markets have many personalities, as stocks are only one of a vast array of different ways for investors to consider in allocating their money. And given that asset allocation is the primary determinant of portfolio returns, stretching beyond the typical bounds by incorporating asset classes across the capital market universe can provide investors with the ability to harmonize their portfolio strategy implementation and meaningfully enhance long-term risk-adjusted returns. Put more simply, all major asset classes play an important role in making capital market music, and broad portfolio diversification if implemented properly can provide investors with attractive if not superior returns with considerably less risk, enabling investors to better relax and enjoy the show.
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