Investment risk includes the possibility that an investment’s value or income will be lower than expected. Diversification means spreading exposure across different investments rather than relying heavily on one.
Key points to understand
Different assets may respond differently to economic and market conditions. Diversification can reduce concentration risk, but it cannot eliminate market-wide losses, liquidity risks or every other risk.
Questions to consider
- What is the purpose and time horizon?
- What costs, limitations and risks apply?
- Does the information reflect your current circumstances and goals?