Q. Why diversification helps?
A. The following is an example and a chart that illustrates the benefits of diversification:
Assume you have $100,000 to invest for 25 years. You can put all that money in a CD earning 0.6% per year. After 25 years, you will have $116,000. This is pretty safe money.
Now, if you divide your money into 5 stacks: $20,000 each and invest in the following: lottery, cash account, CD, US Treasuries (2.1% annual yield), and Stocks (avg 8%).
The chart below shows the end results after 25 years:
A. The following is an example and a chart that illustrates the benefits of diversification:
Assume you have $100,000 to invest for 25 years. You can put all that money in a CD earning 0.6% per year. After 25 years, you will have $116,000. This is pretty safe money.
Now, if you divide your money into 5 stacks: $20,000 each and invest in the following: lottery, cash account, CD, US Treasuries (2.1% annual yield), and Stocks (avg 8%).
The chart below shows the end results after 25 years:
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