Keeping your investments diversified

If you're looking to balance or mitigate the risk levels in your investments, diversification is your best option.

Chapter 6: Diversification

What is diversification?

Diversification is a strategy where you spread the money you're investing across different types of investments. Think of it as not putting all your eggs in one basket.

Is there an easy way to diversify?

There are a couple of fund types that can help to diversity your portfolio.

  • Mutual fund ― Your money is pooled with other investors with a similar goal so you have greater buying power than you would on your own.
  • Exchange-traded funds (ETFs) ― These are similar to mutual funds where they represent diverse investments, but ETFs are bought and sold throughout the day. They may be less expensive since they are not actively managed like a mutual fund, but brokerage commissions may occur when you buy or sell.

Are other fund types available?

  • Bond funds invest in different types of bonds (government, municipal, and corporate) and the risk may vary based on the goal of the fund.
  • Stock funds invest primarily in stock companies, again, the risk may vary based on the goal of the stock fund.
  • Hybrid funds invest in more than one type of investment.

The Just the Facts: Investing worksheet presents some great visuals to help you understand and decide how to invest.

Your chapter 6 checklist

Video Transcript

Securities distributed by State Farm VP Management Corp.

Diversification does not assure a profit or protect against loss.

Bonds are subject to interest rate risk and may decline in value due to an increase in interest rates.

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

Neither State Farm nor its agents provide tax or legal advice.


Start a Quote
Select a product to start a quote.
Agents Near You
Contact Us

Also important

Reaching Your Financial Goals

Have you been putting off that budget for far too long? Financial Expert Tonya Rapley, State Farm agent Kameren Nelson and financial coach Eric Joynt tackle the 'B' word.

State Farm Apps to Download Today

Put your tablet or smartphone to work with State Farm apps that make it easier to manage your insurance, help new drivers build skills and offer feedback on your drive time.

Related articles

Budget and Start Saving Money Today

If you've been putting budgeting off, you've come to the right place. In Budgeting 101, we show you how to kickstart your motivation and budget like a boss.

Financial Jargon Simplified: Credit

Doing some homework to understand important jargon can help you navigate credit with confidence.

Financial Jargon Simplified: Insurance Basics

Doing some homework to understand important jargon can help you navigate insurance with confidence.