Why More Diversification Doesn’t Mean Better Returns

Plus, the best and worst bond diversifiers, and where cash fits in a portfolio.

Amy Arnott, portfolio strategist for Morningstar Inc, discusses why the classic 60/40 investment strategy beat a more diversified portfolio in 2023, and the positive that can come from interest-rate pivots.

00:41 The Benefits of Portfolio Diversification

02:41 How Does the 60/40 Portfolio Hold Up Against a Portfolio with More Asset Classes?

03:54 Why the Well-Diversified Portfolio Struggled in 2023

04:50 Is it Worth it to Invest Beyond the 60/40 Portfolio?

05:57 Why Interest Rate Pivots Are Painful and Encouraging

08:21 Is There an Interest Rate Pivot Right Now?

08:51 Do Bonds Still Provide a Diversification Benefit?

09:52 Which Bonds are the Best Portfolio Diversifiers?

10:57 The Role of Cash in an Investment Portfolio

12:02 Key Takeaways



Read about topics from this episode.

How Did Diversified Portfolios Hold Up in 2023? https://www.morningstar.com/lp/divers...

Why Simpler Has Been Better for Portfolio Diversification https://www.morningstar.com/portfolio...

How Rising Interest Rates Change the Relationship Between Stocks and Bonds https://www.morningstar.com/portfolio...

Which Bonds Provide the Biggest Diversification Benefit? https://www.morningstar.com/portfolio...

Top 10 Things to Know About Building a Diversified Portfolio https://www.morningstar.com/portfolio...



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Read what our team is writing:

Ivanna Hampton https://www.morningstar.com/people/iv...

Amy Arnott https://www.morningstar.com/people/am...



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