© 2023 SEI
2
Exhibit 1
Source: SEI. For illustrative purposes only.
Note that diversification does not protect investors against market risk nor does it insulate against market volatility. All asset
classes undergo market volatility, however they do so in different ways at any point in a market cycle or an idiosyncratic
market event. A well-diversified portfolio of uncorrelated assets will add layers of diversification which should dampen the
effects of market volatility.
What This Means to You
With perfect foresight, you could simply allocate all of your money to the top-performing asset class each year. Without this
divine ability, however, the best option is to invest in a variety of assets (or sub-asset classes, regions or countries) that
overall meet your risk-tolerance levels and react differently to a range of market forces. This serves to help moderate the ups
and downs of portfolio performance, giving you a better chance to reach your long-term goals.
Diversification Across
Broad Asset Classes
Stocks Bonds Cash
Diversifying Within Broad
Asset Classes
European Developed Markets Equity
Emerging Markets Equity
High Yield Bonds
Investment Grade Bonds
Cash
