What is diversification and asset allocation?

Whether you're a new investor or an experienced trader, knowledge is the key to confidence. We're here to help you learn with guided overviews on major topics, in-depth articles, videos, and our complete educational library.

Every investor should begin with these two key ideas.

We achieve diversification through a process called asset allocation, which simply means figuring out how funds will be spread among different types of investments, such as stocks, bonds, and cash. Diversification may reduce risk, but we also want to earn a return, and so we need to strike a balance between risk and reward. Lower risk investments carry less chance of a loss but typically provide lower returns.

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The key to choosing how conservative or aggressive you should be is to gauge your risk tolerance, next up...

Understanding your risk tolerance

This tool illustrates the tradeoff between risk and reward that lies at the heart of investing.
Pay close attention to the "Worst 12 months" figure in the lower right. Would you be comfortable if your investments lost that much in a year? Would you change your investments or stay the course?
Created with Highstock 4.2.5 Moderate Growth
Asset Class Allocation
Large Cap Blend 0%
Small Cap Blend 10%
International Equity 21%
Fixed Income 36%
Cash 4%
Historical 15 year returns
Best 12 months (2004-2018) +36.36%
Worst 12 months (2004-2018) +36.36%
Average 12 months (2004-2018) +36.36%

The primary objective of this portfolio is moderate long-term growth of capital, with current income as a secondary objective. The portfolio is constructed with equity and fixed income investment vehicles seeking to provide diversified opportunities for moderate capital appreciation and income generation.

The primary objective of this portfolio is current income, with principal stability as a secondary objective. The portfolio seeks to generate income, in the form of both interest and dividends, through a diversified mix of fixed income investments—across a range of maturities, sectors, and regions—and a modest exposure to dividend-focused equity investments.

The primary objective of this portfolio is conservative long-term growth of capital, with current income as a secondary objective. The portfolio invests in a diversified mix of fixed income and equity investment vehicles with the aim to provide opportunities for both income generation and modest long-term capital appreciation.

The primary objective of this portfolio is the long-term growth of capital. A modest generation of income is a secondary consideration. The portfolio is constructed primarily with diversified global equity, along with modest fixed income exposure. The inclusion of riskier equity investments may create a greater degree of volatility in an attempt to seek long-term capital appreciation.

The primary objective of this portfolio is aggressive long-term growth of capital. The portfolio of global equity investments assumes a high degree of risk, including the expectation of sharp fluctuations in value over short time periods, in an attempt to seek aggressive long-term capital appreciation.
View assumptions
This is what investment advisers mean by risk tolerance: it's about how much risk is appropriate and comfortable for you. Keep in mind, your risk tolerance will likely change over time as your age, life circumstances, and financial situation change.

Where can I find even more investing ideas?

Potential opportunities can be found almost anywhere. These easily accessible sources give new investors a variety of different ways to find ideas.

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Research

Compare and analyze companies and individual investments with fundamental stock research, technical research, bond research, and mutual fund and ETF research.

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Market news

Find opportunities by looking for market trends and market movers—stocks with a lot of trading activity—or check out market commentary from GainsCapital's own analysts and major news sources.

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Thematic Investing

Another approach is to align your investments with your values or with economic and social trends. These are called themes, and we've highlighted specific investments for a range of different ones.

How do I place a stock trade?
 

1. Locate the ticker symbol
Enter a company name and get the ticker symbol

2. Check the price
Once you've found the ticker symbol of the company you're interested in, check the price and gauge the historical graph for volatility or growth.

3. Select order type
From the drop-down, choose Buy.

4. Execute
Select Preview to review your order and place your trade.