Explain what it means to diversify by asset class.

Question: Explain what it means to diversify by asset class.

Diversifying by asset class means investing in a variety of different types of assets, such as stocks, bonds, real estate, and commodities. This is done to minimize risk and increase the potential for returns. By investing in different asset classes, investors can reduce the impact of any single asset's performance on their overall portfolio. For example, if stocks perform poorly, bonds may perform well, thereby offsetting the losses. Diversification by asset class is an important strategy for managing investment risk and achieving long-term financial goals.

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