Investment strategies for managing portfolio risk and diversification

Investors should be aware of hidden risks in their portfolios, such as concentration risk caused by overlapping holdings. Even when owning multiple funds, a portfolio may depend heavily on the same companies or industries, which can lead to simultaneous losses during market downturns.

To mitigate these risks, investors can look beyond traditional sectors. In Canada, for example, diversifying away from a heavy concentration in banking stocks can be achieved by investing in sectors like utilities, agriculture, or infrastructure. Hydro One, an electricity transmission and distribution provider in Ontario, is cited as a potential alternative for those seeking defensive business models and dividends through essential infrastructure.