In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who asks, "How can we truly know if we are diversified?"
Jason and Brendan both see diversity as a somewhat subjective measure as it depends on where the investor is in his or her investing life, along with the person's tolerance for risk. Investors who are trying to grow their wealth, for example, may want more exposure to stocks. One of the simplest vehicles for diversity in this case can be an index fund pegged to the S&P 500 which will give an investor outstanding diversity with low costs. Investors who are closer to retirement, though, are more focused on protecting their wealth; they will want to add more fixed-income investments into their portfolio to minimize risk while still aiming for a reasonable rate of return. Either way, diversity is in the eye of the beholder and will require some self-examination in any situation.
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Brendan Mathews has no position in any stocks mentioned. Jason Moser has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.