In an effort to help you better understand the markets' recent ups and downs, we recently spoke with Elizabeth Vale, a senior vice president and portfolio strategist with Van Kampen.
Diversification is a key principle underlying prudent portfolio management.
Historically, diversification has afforded many investors a greater balance than a strategy which concentrates on one sector, industry or investment style. Investors wishing to diversify may want to have exposure to different styles such as value and growth, to different sizes of market capitalization, and to both domestic and international securities. Because no one can ever predict with certainty which investments will perform well, or when they will perform well. Diversification can help offset this uncertainty by bringing together a balanced mix of investments. So, if one type of investment is performing poorly, gains from another type might help offset this performance.