What Is a Diversified Portfolio?
Typically a diversified stock portfolio holds US large cap, mid cap, and small-capitalization stocks in proportion roughly similar to that of the overall U.S. stock market, and will include both growth and value stocks. Having 20% and as much as 40% in international stocks provides increasingly important global diversification. A bond portfolio is often diversified across durations and credit levels. The purpose of diversification is to reduce risk and volatility.
