Types of Diversification?

You typically diversify your investment portfolio starting with an asset allocation consisting of stocks, bonds, and cash. The percentage of each depends on the time horizon you set for when you need to draw down on the money. It also depends on your risk tolerance or basically how much can you stand to lose and still sleep at night. For the moderate investor with a time horizon of 10 years or greater, you should have around 60% of your portfolio in stocks, 30% in bonds, and 10% in cash.