This document discusses three levels of diversification that can help reduce investment risk: 1) Diversifying across different asset classes, industries, company sizes, geographic regions, and investment philosophies. 2) Investing in mutual funds to access a wider range of investments than possible individually. 3) Strategic asset allocation, which weights conservative and growth assets to balance risk and potential returns based on goals and risk tolerance. Regular adjustments over time are recommended to align the portfolio with changing needs and goals. Diversification and asset allocation do not prevent losses but can help manage risk.

1.
Compliments of:
Three Rules for Helping Reducing Risk ─ Diversification, Diversification,
Diversification
As any experienced investor knows, markets don’t go up forever. Inevitably, there will be periods of
decline when investor assets shrink along with the market.
The question is, how can we minimize the impact of a market decline on our investments? While you can’t
avoid risk entirely, you can reduce it through diversification. Diversification does not guarantee against
loss. It is a method used to manage risk.
Diversification‐Level 1
In its simplest form, diversification can be achieved by investing in:
A mix of investment categories including stocks, bonds, real estate1 and money markets2;
A variety of companies;
Both large and small company stocks3;
Different geographic areas;
Domestic and international securities4
A range of investing maturities;
Different investment philosophies (growth, blended, value).
For example, you could diversify your common stock holdings by purchasing stocks representing many
different industries. That would generally be safer than concentrating in a single industry. And, to further
minimize your exposure to risk, you might put some money into a money market account or a similar type
of low‐risk investment.
Diversification‐Level 2
Many people do not have enough money to sufficiently diversify on their own, which is why mutual funds
are so popular. Mutual funds pool investors’ money to buy securities from a variety of companies. They
enable both large and small investors to invest in a wider range of companies and investment classes than
they could by themselves.
Different fund families have different characteristics. In the mutual fund marketplace today, you can find
funds of every investment style, in all areas of the economy.
1
Investment risks associated with investing in the real estate fund/portfolio, in addition to other risks, include rental income fluctuation, depreciation, property
tax value changes, and differences in real estate market values. Debt obligations are affected by changes in interest rates and the creditworthiness of their
issuers. High yield, lower‐rated (junk) bonds generally have greater price swings and higher default risks.
2
Investments in the Money Market Account are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, and there is no assurance that the account will be able to maintain a stable Net Asset Value of $1 per share. It is possible to lose money by investing
in the Money Market Account.
3
Investments in small, mid or micro cap companies involve greater risks not associated with investing in more established companies, such as business risk, stock
price fluctuations, increased sensitivity to changing economic conditions, less certain growth prospects and illiquidity.
4
Investment risks associated with international investing, in addition to other risks, may include currency fluctuations, political, social and economic instability
and differences in accounting standards when investing in foreign markets.

2. Diversification‐Level 3
The next level of diversification is asset allocation. Asset allocation is achieved with purposeful
weightings in the different investment categories to match an underlying strategy such as
aggressive growth, income generation, or tax relief.
With asset allocation, you mix both conservative and growth‐oriented investments and arrive at a
blended portfolio which is not as risky as it would be if you were to put all your money into growth
instruments. This strategy offers you more upside potential a portfolio of only conservative
investments. It also offers the potential advantage of giving you something positive to work with
in nearly every kind of market scenario. While one investment is performing poorly, another may
be doing well.
The level of risk reduction you can achieve is dependent on how you allocate your portfolio and
how the various markets perform.
A conservative portfolio would be weighted or allocated most heavily toward fixed income and
money market investments. A more growth‐oriented approach would focus more on stocks.
Further refinement of the asset allocation process can be achieved by diversifying among
conservative and aggressive investments within each investment group. For example, you could
invest in both “blue‐chip” and small‐company stocks in the stock category. Or, you could split your
fixed income investments between lower‐rated and higher‐quality bonds.
Note that like diversification, asset allocation does not guarantee against loss, it is a method used to
manage risk.
You May Want To Make Adjustments Over Time
How you allocate or diversify your personal portfolio is determined by your individual investment
profile ‐ your goals, your risk temperament, your tax situation and your time horizon. Make sure
you make adjustments to your portfolio over time, in order to fit your changing financial needs
and goals.
You should consider the investment objectives, risks, charges and expenses of a
portfolio carefully before investing. The portfolio prospectus contains this and other
information. You may obtain a copy of the prospectus from your representative.
Please read the prospectus carefully before investing.
Securian Financial Group, Inc.
www.securian.com
Securities Dealer, Member FINRA/SIPC. Registered Investment Advisor
400 Robert Street North, St. Paul, MN 55101-2098
1.888.237.1838
© 2010 Securian Financial Group, Inc. All rights reserved.
DOFU 5-2010
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