A diversified portfolio is a portfolio that consists of allocating resources into different asset classes as a form of risk management. Diversification allows a user to mitigate risk from one asset class to multiple asset classes to reduce exposure in one sector.
A traditional investment portfolio typically encompasses a mixture of stocks and bonds. But a diversified investment portfolio should hold alternative asset classes, such as commodities.
To diversify your portfolio, you may invest in commodity futures of a specific commodity or in mutual funds that invest in commodity futures. Depending on your portfolio size, it may be easier to invest in a fund that holds commodity futures and manages them instead of buying commodity futures contracts individually.
