Diversifying is placing your eggs into more than one basket. By doing so, you can reduce the chances of having all your assets in one investment that performs poorly, while increasing your chance of having at least some of your assets in an investment that does well.

The potential benefits of diversification are illustrated in the graph shown here:

In this hypothetical scenario, an investor holding Security A experiences fluctuation in the value of his or her investment. Likewise, an investor holding Security B experiences the same kind of volatility. By diversifying their portfolios, including both shares of Security A and Security B in equal amounts, these investors have the potential to effectively balance their risk. Because downward movements in one security can be offset by upward movements in another, overall portfolio volatility may be lessened.

The manner in which you allocate your assets among stocks and bonds may be an important factor in investment success and may account for much of your portfolio's performance¹. But the growth of the world's economies has fostered a multitude of investment options, both domestic and international, from which to choose. And, there are currently thousands of mutual funds available that package these securities together in endless combinations, making it difficult for an investor to select and maintain a combination of investments that has a good potential for growth.

Through my relationship with Legend Advisory Corporation, my clients have access to asset allocation programs including the Strategic Asset Management (SAM)^®/SAM^® Select Portfolios and the Freemark Managed Portfolios. These services were designed to make professional diversification techniques, investment selection and ongoing investment management available to individual investors. SAM^® and SAM^® Select and Freemark feature actively managed mutual fund portfolios with objectives that range from conservative to aggressive. In line with each model’s objective, the portfolios seek to hold an optimal mix of mutual funds with the potential to maximize returns while attempting to minimize risk.

¹ Source: Brinson, Gary P.; Hood, L. Randolph; Beebower, Gilbert L., "Determinants of Portfolio Performance," Financial Analysts Journal, Vol. 42, No. 4 (July/August 1986) pp. 39-48.