A rule of conservative investing is not putting all of your investment eggs in one basket. You can reduce risk and volatility in your portfolio by investing in different types of securities — among stocks, bonds and short-term investments, which are unlikely to all move in the same direction. Within each asset type, you can diversify among different security issuers, market capitalization levels, industries or geographic locations. Fund investors also can diversify among various management investment styles, such as growth and value.
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