What Diversification Does (and Does Not Do)
Spreading investments across companies, sectors, regions and asset types can soften single failures, but it cannot prevent losses in broad downturns.
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Stocks, Bonds, and Cash: What Each Is For
Stocks represent ownership, bonds represent a loan, and cash provides liquidity; each does a different job depending on when you need the money.
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How Compound Growth Works
Compounding turns earnings into more earnings, which is why time matters more than contribution size and why fees and taxes quietly compound as well.
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Crypto Investing: A Guide for the Next Generation
As younger investors embrace digital assets, cryptocurrencies have become an essential part of modern wealth management. With high volatility and evolving regulations…
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ESG Investing in a Volatile Market
ESG (Environmental, Social, and Governance) investments are rapidly gaining traction as investors seek to align their financial strategies with ethical considerations.…
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The Role of Private Equity in Diversified Portfolios
Private equity can expand a portfolio beyond public markets, but access alone is not an investment thesis. The relevant question is whether a specific fund or direct…
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Key Terms
Words You Will Meet
Short definitions from the glossary for this topic.
Open the full glossary- Asset allocation
- The mix of broad asset classes, such as stocks, bonds, and cash, that makes up a portfolio. It is the main structural decision in investing and is usually shaped by goals, time horizon, and tolerance for risk.
- Bond
- A loan from an investor to a government or company in exchange for regular interest and the return of principal on a set date. Bond prices move in the opposite direction from interest rates.
- Capital gain
- The profit realized when an investment is sold for more than it cost. Gains are generally taxed differently depending on how long the investment was held.
- Compound growth
- Growth that builds on earlier growth, as returns are earned on both the original investment and the returns already accumulated. Its effect is modest over a few years and large over decades.
- Diversification
- Spreading investments across assets that do not move together, so that no single holding, sector, or asset class determines the outcome. It narrows the range of results without eliminating the possibility of loss.
- Dividend
- A share of a company's profits paid to shareholders, usually in cash and on a regular schedule. Dividends are one of the two sources of return from owning stock, alongside changes in price.
- Dollar-cost averaging
- Investing a fixed amount at regular intervals regardless of price, so that more shares are bought when prices are low and fewer when they are high. It is a way of removing timing decisions from the process.
- Drawdown
- The decline from a portfolio's peak value to its subsequent low, measured before it recovers. Drawdowns describe the experience of holding an investment through a difficult period, which volatility alone does not capture.
Articles are general financial education, not individualized investment, tax, or legal advice. Read our important disclosures.