Most portfolios are made up of stocks, bonds and cash. Real estate – through REITs – and commodities have also made their way into plenty of portfolios as well. The reason for all of this comes down to diversification. That is, putting together a portfolio of assets that move in different ways from each other. The idea is that through diversification, we can get better long-term returns.
And that’s true, for the most part.
The problem is that a standard portfolio of stocks, bonds, cash and REITs/commodities may not make much sense on their own anymore. Correlations for these assets are getting closer and closer as more investors own them. That diversification might just go out of the window.
But luckily, there are ways to build a portfolio that zigs when the market zags.
Check out our Dividend Investing Ideas Center to learn about more investment options.
Be sure to explore the implications of a rising interest rate environment for an investor here.