This 1 Stock Market Chart Will Make You a Smarter Investor

Most investors know diversification is an essential piece of planning their portfolio. If you diversify across asset classes properly, you can maximize your returns for your risk tolerance.

Many investors stick with basic portfolio allocations like 60% stocks, 40% bonds because someone told them that's a good balance. But if you want to understand diversification and why a 60/40 stock-to-bond ratio might make sense, be sure to check out the chart below.

Let's say you wanted to get a relatively safe return on your investment, but still get your money working for you. You might think investing all of your money in U.S. treasury bonds is the best way to do that. After all, if the U.S. government defaults on its debt, you probably have bigger things to worry about than going broke.

Source Fool.com