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Diversification Stocks Which factors should be considered when diversifying with stocks? Growth or Value Domestic or International Large, Medium or Small Company Sector Growth or Value Historically, growth and value stocks have moved in and out of favor at different times. By having both types of funds in your portfolio, you may benefit as the styles alternate in leading the market. The numbers along the left-hand side of the chart (-15 through +15) do not indicate negative or positive fund returns, but rather the performance of growth investments and value investments relative to the performance of the S&P 500 Index. Domestic or International Since international and domestic (U.S.) markets don't always move in sync, it is important to consider having both in your portfolio. International stocks generally involve greater risk than domestic stocks because of the greater likelihood for currency fluctuation and economic and political instability. Large, Medium or Small Company Generally, the smaller the company the more risky the investment. However, since these market segments often move in opposite directions, it's important to be diversified into both. Sector Funds that invest in a single-industry sector, such as biotechnology, gold or banking are called sector funds. They tend to perform erratically and often dominate both the top and the bottom of the annual mutual-fund performance charts.   Quick Question William's investments are spread over 24 different mutual funds, so he's diversified, right? A. He's only diversified if his mutual funds also represent many different industry sectors. B. He's only diversified if his mutual funds also represent many different stocks. C. He's only diversified if his stocks also represent many different industry sectors. D. He's only diversified if his stocks also represent many different mutual funds. < PREVIOUS NEXT > #40101