The value of diversification illustrated in an exquisite quilt

No single asset class has been the market’s top performer year after year on a consistent basis.

Unfortunately, no amount of skill or experience has enabled anyone to forecast how various asset classes will stack up in any of those given years. And as a result, those who try to predict and time the markets usually get burned.

This challenge is illustrated nicely in the chaotic colours of this quilt of total returns by asset class.

For Oppenheimer’s John Stoltzfus, it teaches us a valuable lesson in investing.

“In our view, the quilt illustrates the importance of portfolio diversification and regular rebalancing,” Stoltzfus writes. “On its own, each asset class can be quite volatile, but a mix of assets in a balanced portfolio can lower overall volatility.”

Diversify. And rebalance.

NOW WATCH: How to clear out a ton of space on your iPhone superfast

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.