Video Investments that zig when others zag

Holding the right mix of investments can help smooth your portfolio’s returns over time

3 min read

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Diversifying widely can help manage your portfolio’s risk and make it easier to stick with your investments when the market tests your nerves.

Key Takeaways:

  • Diversification is an investment strategy that aims to hold a variety of securities that don’t always move together but may gain in value over time.
  • Though it’s not a guarantee, the long-term intent of diversification is to maximize returns and reduce risk by holding investments that are driven by different underlying forces.
  • Diversification can help manage the risk in your overall investment strategy and may help you feel more grounded during market turbulence.
  • To diversify, investors should not only look to balance their allocation to stocks and bonds but also make sure their portfolios are not concentrated in one region or industry.
  • In addition to—or instead of—owning individual stocks and bonds, investors can build their portfolios using mutual funds, exchange-traded funds and other investment vehicles.

Asset allocation and diversification strategies do not guarantee profit and may not protect against loss.

The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Principal value and return of an investment will fluctuate with changes in market conditions.

Investors should carefully consider the investment objectives and risks as well as charges and expenses of mutual funds and exchange traded funds (ETFs) before investing. To obtain a prospectus, contact your Financial Advisor or visit the fund company’s website. The prospectus contains this and other important information about the mutual funds and ETFs. Read the prospectus carefully before investing.

Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Furthermore, high yield bonds are considered to be speculative with respect to the payment of interest and the return of principal and involve greater risks that higher grade issues.

International investments involve considerations and potential risks not typically associated with domestic securities, including risks associated with changes in currency values, economic, political and social conditions, loss of market liquidity, the regulatory environment of the countries which a fund invests, and difficulties in receiving current or accurate information.

Emerging market investments involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, from economic or political instability in other nations or increased volatility and lower trading volume.

Dividends, interest, and some capital gains received on foreign securities may be subject to foreign tax withholding or other foreign taxes. You should consult with your tax adviser as to the consequences of any distributions that may be paid including how and/or whether you might be able to obtain a reclaim of any amount so withheld. Neither UBS Financial Services Inc. nor any of its employees provide legal or tax advice.

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