June 9, 2025

Why does diversification matter now?

By Sun Life Staff

In uncertain markets, diversification can be a key strategy to manage risk and achieve more stable returns. This article discusses the importance of spreading investments across various asset classes to mitigate volatility.

For many investors, the threat of losing money is hard to stomach. One way to try to help provide a more consistent or stable return is through diversification, which entails spreading your investments across different asset classes, industries, and geographic regions to reduce overall risk. As you may know, not all investments will perform in the same way at the same time. By holding a mix of bonds and equities across different market sectors and markets and countries, some may be increasing in value, while others are falling. This can help reduce the risk that comes from being overly concentrated in just a few investments. And over time, it tends to reduce volatility and smooth out returns.

Why does this matter now?

Lately, the stock market has moved up and down. When one type of investment (like U.S. stocks) does well for a long time, it’s tempting to put all your money there. But that can be risky. If, in this example, U.S. stocks decline in value, you may experience significant losses in your portfolio. By spreading your money around—into stocks and bonds—you’re less likely to get hit hard if you have too much of one type of investment, are overexposed to one country or market sector.

What can you do?

You don’t need to be an expert to invest smart. Here’s the big idea: don’t bet everything on one thing. Mix it up - some stocks, some bonds, maybe other investments too. It won’t make you rich overnight, but it can grow your money steadily, without as much stress. If you’re unsure, talking to someone who knows investing, like our teams at Sun Life, can help you figure out what mix fits you. We also have digital tools like Sun Life One Plan available to you when you sign into your account. Create a personalized financial assessment and unlock a lifetime of possibilities by planning for your financial needs and protecting your future.

For illustrative purposes only. Returns have been rounded to the nearest whole number for simplicity. The Diversified portfolio is a hypothetical portfolio that is invested as a 60/40 mix of MSCI ACWI All Cap GR USD (60%) and BBgBarc Global Aggregate TR Hdg CAD (40%). The Diversified Portfolio is not intended to represent any investment managed by Sun Life Global Investments. It is not possible to invest in an index.

The infographic presents a comparison of annual returns across different asset classes over a 10-year period, illustrating the variability in performance from year to year. Asset classes include:

  • Canadian Equities
  • U.S. Equities
  • International Equities
  • Canadian Bonds
  • Global Bonds
  • Cash

Each year, the top-performing asset class is highlighted, showing that no single asset class consistently outperforms others. This visual emphasizes the benefit of a diversified portfolio. While other asset classes had periods of volatility, the hypothetical diversified portfolio, comprised of 60% equities and 40% fixed income, offered a comparatively smoother ride and reduced the effects of volatility from any one asset class over the same period of time.

About the chart

Equity returns are represented by the following indices in C$ terms and include reinvestment of dividends: U.S. stocks: S&P 500 Total Return Index; Canadian equities: S&P/TSX Capped Composite Total Return Index; International equities: MSCI EAFE NR Index; Emerging market equities: MSCI EM Net Return Index; Global equities: MSCI World Net Return Index; Real estate: FTSE EPRA/NAREIT Developed Index; Infrastructure: S&P Global Infrastructure Total Return equities; Canadian bonds: FTSE Canada Universe Return Index; U.S. bonds: Bloomberg U.S. Aggregate Total Return Hedged Index; Global bonds: Bloomberg Global Aggregate Total Return Index. The performance of each index including the diversified portfolio is provided to illustrate historical market trends; it does not represent the performance of a particular Sun Life Global Investments product. Source: Morningstar. Data as of December 31, 2024.

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This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.

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