How a Multi-Asset Portfolio Investing Strategy Can Mitigate Risk

Diversification means different things to different people. Many investors regard any kind of split across stocks and bonds as diverse enough to feel protected against unexpected market swings. Unfortunately, holding these two popular asset classes is often not enough to significantly reduce risk in a single portfolio.

Empirical evidence suggests that in periods of heightened volatility, stock and bond markets often move in tandem with one another. Changing economic conditions that push one market downward can pull the other with it, thereby increasing the correlation between stocks and bonds. For that reason, it's important to pursue diversification on multiple levels.

First, investors should look to diversify within in order to protect themselves against fluctuations in the value of individual investments. Secondly, they should consider further diversifying their portfolios by