Diversifying income streams is a fundamental investment principle to mitigate risk and optimize potential returns. Here are three common options:

1. **Stocks**:
– **Pros**: Stocks offer a share in a company’s profit and may provide dividends. They’re liquid and can significantly appreciate over time.
– **Cons**: They’re volatile and can lose value quickly. Requires market knowledge to invest wisely.

2. **Real Estate**:
– **Pros**: Real estate can offer rental income and tax advantages. Property values often appreciate over time, and it’s a tangible asset.
– **Cons**: It requires a large upfront investment, is not liquid, and comes with ongoing management and maintenance responsibilities.

3. **Retirement Accounts (401(k)s, IRAs)**:
– **Pros**: These accounts offer tax benefits—tax-deferred growth or tax-free withdrawals, depending on the account type. They encourage long-term saving.
– **Cons**: Funds are generally locked until retirement age without penalties, and there may be limited investment options based on the retirement plan provider.

Each option fits different investor profiles based on their risk tolerance, investment horizon, and involvement desired in managing their investments.

**Stocks** are great for those comfortable with the market’s ebb and flow and wish to actively manage their portfolio. **Real Estate** fits investors looking for a physical asset and those who can handle the responsibilities of property management or afford a property manager. **Retirement accounts** are ideal for virtually any investor due to their favorable tax treatment and for serving as a cornerstone of retirement planning.

Before diving in, it’s vital to conduct thorough research or consult with a financial advisor to align investments with financial goals and risk appetite.