Diversification across multiple asset classes is one of the most effective risk management tools available to investors, according to Manning & Napier.

Investors can reduce the risk of declines in their portfolio by including multiple asset classes, like U.S. large cap stocks, small cap stocks, international stocks, short-term fixed income, intermediate-term bonds and long-term bonds.

Diversification risk-proofs your portfolio because when stocks are down, domestic bond prices may rise and international equities may not react at all.

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