Why Diversify?

Why diversfiy? If there's a hot investment, why not pour everything into it and ride with it? The reason is that most of the time you can't spot a winner until it's too late.

This is a picture from the Transamerica website, showing how different investments have performed over a 10 year span.



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You can follow International investments, Small Capital investments, even Growth investments, and you will see that they aren't consistently the best performers year after year. Bonds gave the best returns from 2000 to 2002, but have yielded less return since then.

Through diversifying investments a portfolio will have winners and losers, and although the portfolio may not give the best performance, as long as it is properly diversified chances are it won't yield the worse returns either.