Similar to a stock mutual fund, a bond fund
offers excellent diversification since there are hundreds or even thousands of individuals bonds included in the fund.
Peer to peer loans have
excellent diversification potential, since they most likely have low or negative correlation to many other common investment alternatives, such as stocks or bonds.
For stocks, they currently use 6 exchange - traded funds (ETFs) from Vanguard and iShares that own thousands of companies in the US and overseas
for excellent diversification.
AAII Model Portfolios Model Fund Portfolio: REITs Show Their Long - Term Value During the portfolioï ¿ 1/2 s past 12 years, long - term equity REITs have provided
excellent diversification without sacrificing return.
These index funds will not only accomplish broad asset allocation but will also provide
excellent diversification among the assets classes while keeping expenses low.
Emerging markets also
provide excellent diversification for investors, as we mentioned above, these funds have a correlation of right around 0 with the S&P 500, a welcome sign for investors worried about future U.S. market performance.
TIPS are
an excellent diversification choice because they have little or no correlation with most other investments that are typically in an investment portfolio.
And given
the excellent diversification provided by the uncorrelated returns, this combination of carry, momentum, and value premia could be one of the most compelling investment opportunities available in today's markets.
E.g. for US exposure, I'd go with the S&P 500 as that provides
excellent diversification that can be had at a very low MER.
REITs are
an excellent diversification vehicle as The Sun says, however, picking an individual REIT is like picking an individual stock.