Diversify your assets | American Funds

Develop an investment strategy

Retirement Planning

Diversify your assets

You can reduce the risk in your portfolio by spreading your investment dollars among different types of assets. This is known as diversification.

How diversification works

Investments may lose and gain value at different times. When some investments are down, others may be up. If the values of certain investments have declined significantly, others may not have fallen as much.

If you put all of your money into a single investment, you’d be depending solely on the return of that one investment — for better or worse. Your overall returns would fluctuate right along with any ups and downs of the one investment.

An alternate strategy is to diversify your investments. By spreading your risk, your overall returns wouldn’t reach the lowest lows or the highest highs of any single investment you own. Diversifying your portfolio will help reduce its overall volatility.

Stocks vs. bonds example

Since 1926, stocks have provided a higher return than bonds in 55 of 88 calendar years* — far from an overwhelming advantage. Bonds had a higher return in the other 33 years, so you need to put money in stocks as well as bonds if you want the opportunity to benefit from both.


* Based on year-by-year total returns. Source: for stocks, Ibbotson Large Company Stocks Index; for bonds, Ibbotson Long-Term Corporate Index.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from your plan’s financial professional or downloaded and should be read carefully before investing.

Invest for your time horizon

How many years before you retire? Use the answer to create an effective plan.

Asset allocation

Use our sample portfolios
as a guide to build your
investment strategy.