Suppose an investor owns a number of stocks and bonds, which he looks to complement with commodities, REITs and high yield bonds. Sound like the beginnings of a reasonably diversified portfolio, right?
Perhaps not as much as you might think.
True portfolio diversification requires looking past the label of “asset class” to the underlying factors that ultimately drive returns. Today, ongoing volatility, rich valuations and high management fees mean that knowing what you own has never been more important.
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