How to Build a Diversified Investment Portfolio — Asset Allocation by Age, Risk, and Goals
Diversification is the only free lunch in investing, as Nobel laureate Harry Markowitz famously observed. By spreading your money across different asset classes, sectors, and geographies, you reduce the risk that any single investment can devastate your portfolio. In February 2026, with the S&P 500 (SPY) at $685.99 and a P/E ratio of 27.62, bonds yielding 4.02% on the 10-year Treasury, and small caps trading at just 18.86 times earnings via the Russell 2000 (IWM), the case for diversification is especially compelling. Yet many investors remain concentrated in a handful of US large-cap tech stocks, mistaking recent outperformance for a permanent condition. The Nasdaq 100 (QQQ) has surged but trades at a stretched 32.65 P/E, while value stocks (VOOV at P/E 23.87) have quietly delivered strong returns with less risk. This guide explains how to build a properly diversified portfolio based on your age, risk tolerance, and financial goals — using real data to illustrate why balance beats concentration over time.