Amy Arnott, Portfolio Strategist for Morningstar, joined Zoe Hunt, Host of RIA Channel, at the 2026 Morningstar Investment Conference to discuss the benefits and challenges advisors face when building a diversified portfolio.
Morningstar’s Diversification Landscape report found that in 2025, a diversified portfolio spanning 11 asset classes outperformed a traditional 60/40 portfolio by about five percentage points. Arnott notes that gold, commodities, and international stocks were among the key contributors. She adds that so far in 2026, the diversified portfolio has continued to outperform.
For advisors looking to build a diversified portfolio, Arnott emphasizes that successful diversification can require client education. She explains that it can be difficult to explain the role of lagging allocations to clients, as not every asset class in a diversified portfolio will perform well at the same time. She also cautions that correlation patterns can shift across different market environments.
Arnott suggests building a portfolio foundation around U.S. and international stocks, high-quality bonds, and cash before adding smaller allocations to specialized asset classes such as commodities or gold. She also highlights the continued value she sees in international stocks, as well as short- and intermediate-term bonds. However, she encourages advisors to exercise extra caution around liquid alternatives, private equity, private credit, high-yield bonds, real estate, and cryptocurrency.
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