7 Guidelines for Adding New Asset Classes to Your Portfolio

The benefits of having several different asset classes in your portfolio are well-known. There are dozens of increasingly exotic asset classes available to invest in.

An investor need not invest in all of them in order to be successful in reaching his financial goals.

Consider these guidelines when deciding whether or not to add a new asset class to your portfolio.

7 Guidelines for Adding New Asset Classes to Your Portfolio


If your portfolio currently contains only one or two asset classes, you will almost surely benefit from adding another one. 

1. Number of Asset Classes

The addition of new asset classes to a portfolio is often used as an excuse by the investor to engage in the harmful practice of performance chasing.

2. Avoid Performance Chasing

Investors consciously and subconsciously project the recent past into the future, despite the well-known fact that past performance is no indication of future returns.

Historical correlations are relatively easy to look up. Correlations vary over time, but you’re looking for an asset class that is non-correlated with your current asset classes as much as possible.

3. Low Correlation