I thought that everyone knew that there were seven asset classes: cash, equities, bonds, real estate, precious metals, commodities and collectibles. Since everyone seems to agree that portfolios should be diversified, you would expect that portfolios would include all seven. For the typical retail investor, collectibles can be eliminated because of the personal level of knowledge required. Commodities can also be excluded, as the primary methods to invest in commodities are derivatives and proxies of commodities, such as futures contracts and futures options. Purchasing actual physical commodities is not practical for retail investors, as it is impractical to store large quantities of most commodities. However, the remaining five asset classes are all available to be easily added to investment portfolios. By optimizing the percentage allocation to each asset class, reductions in risk and improvements in returns are achieved, as demonstrated in the above charts.