Diversification may improve risk-adjusted returns

Sources: © 2021 – Morningstar Direct, All Rights Reserved1, and Wells Fargo Investment Institute. Data from January 1, 2001 to December 31, 2020. Performance for the Moderate Growth and Income Liquid (3AG) Portfolio is hypothetical and for illustrative purposes only. Index returns do not represent investment performance or the results of actual trading. Index returns reflect general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. Unlike most asset class Indexes, HFR Index returns are net of all fees. Because the HFR Indexes are calculated based on information that is voluntarily provided, actual returns may be lower than those reported. An index is unmanaged and not available for direct investment. Hypothetical and past performance does not guarantee future results. Standard deviation is a measure of the volatility of returns. The higher the standard deviation, the greater volatility has been. The risk associated with the representative asset classes and the definitions of the Indexes and the composition of the Portfolios are provided at the “Index Definitions and Asset Class Risk Disclosures” link above.

Diversification does not guarantee investment returns or eliminate risk of loss.

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Key Takeaways

  • Over time, a diversified portfolio can help mitigate volatility during times of market uncertainty and smooth returns.
  • Real assets and alternative investments add an element of diversification to a traditional portfolio comprised of stocks and bonds.