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Neglected tools in your diversification kit

Investors with a solid investment plan that includes asset allocation can ride out shifts in markets, and avoid reactive responses to regular market crises.

Michael McCarthyContributor

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Diversification is one of the most powerful risk management tools available to all investors. Many investors are well diversified in a particular area (for example, shares) yet fail to recognise the opportunities that other asset classes represent.

Discussions often zero in on spreading risk within asset classes, but studies show that it is the diversification across asset classes that is the biggest single contributor to returns.

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Michael McCarthy is chief market strategist at CMC Markets.

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    Original URL: https://www.afr.com/wealth/personal-finance/neglected-tools-in-your-diversification-kit-20210404-p57gfw