Asset allocation, diversification, and the use of dividend-paying stocks are potential strategies’ for reducing volatility.

Successful asset allocation strategies depend on using assets with low correlation.

Investors are exposed to financial risk in two ways: company-specific risk and market risk. Long-term investors can reduce exposure to company-specific risk by diversifying among many different securities within the same asset class. Market risk is managed, but not eliminated, by holding investments in several different asset classes.