The Benefits Of Diversification

We have discussed how diversification works and shown examples, but what about how it works in your portfolio? A recent article in Money discusses how much you should have invested in stocks depending on your age. And while we don't want to take a position in this, we would like to point out the "Finding the Right Mix" figure shown in the article. As you can see, in general, the range of possible returns declines as you increase the percentage of bonds in a portfolio. This is the decline in volatility that is also exhibited in the lower standard deviation from adding bonds to a stock portfolio.