text: The market is 'risk efficient': investment vehicles with the highest reward also have the highest risk.\n\nAs an example, ETFs of emerging stock markets have performed best in the last 2 years, but they are extremely risky and volatile (check the market action in the last few weeks).\n\nOne way to reduce risk while maintaining performance is to diversify: by holding ETFs covering different asset classes (such as US, foreign, small-cap etc...), the risk of your total portfolio will be less than the risk of its components taken separately.