Guides / How investing works
Diversification and asset allocation
Don't put all your eggs in one basket.
Diversification means spreading money across many investments, so one bad one doesn't sink you. Asset allocation is how you split money between broad types, like stocks and bonds.
The basics
- Stocks have historically grown more over long periods but swing more
- Bonds have generally been steadier but grown less
- Cash is steady but may not keep up with inflation
- The mix you choose sets most of your ups and downs
Rebalancing
Over time, your mix drifts as some investments grow faster. Some people rebalance once a year to get back to their chosen mix.
One common mistake
Holding a lot of your employer's stock ties both your paycheck and your savings to one company.
General education only, not investment advice. Past performance doesn't guarantee future results. Nickel Gains isn't paid by any broker, fund company or adviser.