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156 Don’t Make Me Say I Told You So

cash equivalents. You might also consider investing a portion of
your money in “alternative” investments, which include assets

such as gold, real estate, hedge funds, and managed futures.
Alternative investments are used because their returns have a

low correlation with those of stocks, bonds, and cash.

In addition to spreading your money over various asset

classes, be sure to distribute your investments over various

investment options within a particular asset class. If you have
75% of your portfolio in stocks, and your stock portfolio consists
of a large amount of only one stock or stock fund, proper

diversification is lacking. Depending on your age, risk tolerance,

and other assets, your asset allocation might be described as
conservative, moderate, aggressive, or some place in between.

Summary

► Diversify your portfolio across different asset classes.

► Diversify among various investments within an asset class.

► Make sure that your portfolio never becomes too
concentrated in one particular stock or other investment.

Chapter 4: The Most Common Investor Mistakes