How to Diversify Your Portfolio

Diversification is one of the most important principles in investing. At its core, it's about managing risk—spreading your investments so that your financial future doesn’t depend on the success of just one company, industry, or asset class.

For women navigating major life transitions—retirement, divorce, or the sale of a business—understanding how to build a well-diversified portfolio can offer both financial protection and peace of mind.

What Is Diversification?

Diversification means not putting all your eggs in one basket. Instead of relying on a single investment to perform well, you invest across a range of different assets.

These assets may include:

• U.S. and international stocks

• Bonds and fixed income

• Real estate investment trusts (REITs)

• Cash and cash equivalents

• Alternatives like commodities or private equity (in some cases)

Each of these asset types behaves differently depending on economic conditions. When one area of the market is underperforming, another may be doing well. Diversification is the strategy that smooths the ride.

Why Diversification Matters

No one can predict with certainty which asset class will perform best in any given year. Markets are cyclical. Economic shifts, interest rates, inflation, and global events all affect performance in different ways.

By diversifying, you're reducing the risk of a significant loss. If one part of your portfolio declines, others may help offset it. Over time, this can lead to more consistent and sustainable returns.

It’s especially critical as you near or enter retirement. Withdrawing money from a concentrated portfolio in a down market can quickly deplete your savings. Diversification helps cushion against that risk.

Diversification Isn’t Just About Asset Classes

True diversification goes beyond choosing different types of investments. It also involves spreading risk across:

Sectors: Investing across various industries (technology, healthcare, energy, consumer goods) helps avoid concentration in a single economic area.

Geographies: Including international and emerging market exposure can provide growth opportunities not available in U.S. markets alone.

Company Size: A mix of large-cap, mid-cap, and small-cap stocks can add balance, as different sized companies respond differently to market trends.

Investment Styles: Combining growth and value strategies can help reduce volatility over time.

Common Mistakes to Avoid

Over-diversifying: While spreading your investments is important, owning too many overlapping funds can lead to redundancy and reduced effectiveness. You want to be diversified, not diluted.

Set-it-and-forget-it: Your portfolio should evolve as your life changes. A divorce, inheritance, sale of a business, or entry into retirement may all warrant a portfolio review and rebalance.

Ignoring tax diversification: Where your investments are held matters too. Using a mix of tax-deferred, tax-free, and taxable accounts can provide flexibility in retirement.

How to Get Started When It's Time to Diversify

Building a diversified portfolio starts with your goals. What do you want your money to do for you—now and in the future? Your risk tolerance, time horizon, and income needs all shape how your portfolio should be constructed.

You don’t have to do this alone. A financial advisor can help you design a strategy that aligns with your personal values, protects what you’ve worked hard for, and keeps you on track—no matter what the markets are doing.