As market volatility continues during the coronavirus pandemic, it’s important to consider diversification as part of your investment strategy so that all of your money is not tied up in a single investment.
Stash’s Portfolio Builder can help you create a diversified portfolio of investments that’s suited to your risk level.*
Why is diversification important?
An important part of the Stash Way, diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. Simply put, when you diversify, you avoid putting all of your money in too few stocks, bonds, or funds.
A diversified portfolio will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs). It’s also important to invest in different markets globally, not just in the United States.
While no one can predict the future, diversifying your portfolio can help protect you against the uncertainty of the market. When the markets react to something like the coronavirus outbreak, diversification can help you reduce your risk.
Diversifying with Portfolio Builder
Stash’s Portfolio Builder can help you create a portfolio that follows the Stash Way and that is prepared to handle surprises in the market.
While investing always comes with some risk, there are degrees, and you can use this tool to map out your own investing strategy by choosing your level of risk. Portfolio Builder has three risk levels, for conservative, moderate, and aggressive investors. Here’s what that means:
- Conservative investors prefer stability, even if it means smaller gains—but still want some growth potential for their portfolio.
- Moderate investors are looking to build stable portfolios, but are also willing to take on a little more risk in exchange for potentially higher long-term growth.
- Aggressive investors are looking to maximize the long-term growth potential of their portfolio, even if that means sacrificing some stability and incurring bigger losses.
When you sign up for a Portfolio Builder portfolio, we’ll select one of three portfolios for you, based on the information you gave us about your risk tolerance when you signed up for Stash. Your money will then be allocated based on your risk preference into these 6 funds:
- Match the Market (IVV)
- Happy Medium (IJH)
- Up and Coming (VWO)
- Small but Mighty (VB)
- Foreign Heavyweights (IEFA)
- Broad USD Bonds (IUSB)
More aggressive investors will tend to have more stocks, while more moderate and conservative investors will have more bonds.
Ride out volatility with the Stash Way
Use Portfolio Builder so that you’re prepared with diversified investments when the market changes unexpectedly. And remember the other important steps of Stash Way, investing for the long term and investing regularly.