What is Diversification?
What is diversification?
Diversification is a smart investment strategy to spread your money across a variety of financial instruments. It’s the practice of not putting all your eggs in one basket! By investing in a variety of assets, investors can offset potential losses in any one investment when markets are volatile. For example, if the stock market crashes, bonds may hold their value or even increase in value.
Diversification is often used as a means of managing risk, but it can also be used to reach other goals, such as increasing returns or generating income. Investors should keep in mind that diversification does not guarantee against loss, and it is possible to lose money even with a diversified portfolio. However, diversification can help to mitigate risk and smooth out returns over time.
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