An effective investment strategy carefully allocates across asset classes with the goal of maximizing return for a given level of risk. This chart shows two approaches – on the left, a less diversified strategy that invests in three asset classes, and on the right, a more diversified strategy that invests in eight asset classes. From 2001 to 2020, each strategy has experienced the same level of risk (as measured by standard deviation or “volatility”), but the more diversified strategy experienced a higher return.