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When attempting to diversify a portfolio which is currently 100 percent invested in investment grade corporate bonds, the two best asset classes that provide the greatest potential diversification benefits would be stocks & alternative investments.
Firstly , stocks are typically considered a higher risk /higher reward option as their prices can fluctuate greatly based on market conditions . This makes them an ideal choice for hedging one’s exposure to fixed income securities such as corporate bonds. Additionally , investing in alternatives such as commodities or real estate can further reduce any risk associated with bond investments due to their low correlation with other asset classes (Wilshire Associates Inc., 2021).
Overall , it is clear that both stocks & alternative investments have valuable roles when it comes to portfolio diversification! By utilizing these two options alongside traditional fixed-income securities one can help ensure their overall financial security is less exposed to any unexpected market changes !
Wilshire Associates Inc. (2021). Benefits of Diversification – Investopedia. [online] Available at: https://www.investopedia.com/terms/d/diversificationbenefitsof.asp [Accessed 15 Apr 2021].