### Portfolio Diversification [1](https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview) [2](https://investor.vanguard.com/investor-resources-education/portfolio-management/diversifying-your-portfolio) The main way to mitigate risk in your portfolio, is through diversification in the assets that you are holding. Because we know that each sector will behave differently because of market trends, it is reasonable to assume that some stocks will go up while others will go down. By putting your money in different areas of the market, you are able to offset the losses incurred by stocks going down in value with stocks that you are holding that increase in value. This concept of holding assets that will move in different directions is called correlation. If two stocks move in opposite directions of each other, then they have low correlation. Having low correlation is important when investing because it protects you from drastic shifts in the market. If one lowers in value and another rises, then the difference between the two is a net profit, then proper risk management has been achieved through diversification. ### [Setting Investment Goal and Timeframe ](https://www.finra.org/investors/investing/investing-basics) When investing, the most important aspect to consider is time. Over time, the stock market has done nothing but provide consistent returns to investors. By understanding this fact, we can position ourselves in a way that can return the most amount of money possible by keeping money invested over a long period of time. Investment goals are also a crucial part of holding a healthy portfolio. By understanding the average return rates, and setting goals that can meet those rates, you can properly create a plan for your money.