The final step to diversify your portfolio is to invest in different strategies within each asset class, sector, and region. Strategies are methods or approaches that you use to select, buy, and sell your investments, such as value, growth, momentum, quality, dividend, and factor investing. Each strategy has its own criteria, advantages, and disadvantages, and performs differently depending on the market environment, investor behavior, and risk appetite. For example, value investing involves buying undervalued stocks that trade below their intrinsic value, while growth investing involves buying high-growth stocks that trade above their intrinsic value. Momentum investing involves buying stocks that have strong price trends, while quality investing involves buying stocks that have strong fundamentals.
By investing in different strategies, you can reduce your exposure to any single style risk and benefit from the performance of various factors and drivers of returns. You can use strategy-specific funds or ETFs to gain exposure to different strategies within each asset class, sector, and region. You can also use multi-strategy funds or ETFs to combine different strategies and optimize your portfolio.
By following these four steps, you can diversify your portfolio to minimize market fluctuations and achieve your financial goals. Remember, diversification is not a one-time event, but a continuous process that requires regular monitoring, rebalancing, and adjustment. You should review your portfolio periodically and make changes as needed to reflect your changing circumstances, preferences, and market conditions.