Diversification of an investment portfolio is one of the most important principles in investment management. Diversification means dividing the investment in a number of different assets such as stocks, bonds, mutual funds and forex.
The goal of diversification is to reduce the risk of the portfolio. When the portfolio is dispersed, it does not depend on just one or two assets. If one of the assets decreases in value, the impact on the entire portfolio will be limited.
There are several types of dispersion:
Branch dispersion. Division of investment between different sectors of the economies in which investors invest, such as technology, finance, services, etc.
Geographical dispersion. Division of investment between different countries.
Diversification of stocks and bonds. A combination of stocks, which are considered to have high profit potential and volatility, with bonds considered to have lower risk.
Some potential benefits of diversifying an investment portfolio:
Mitigation. Diversification reduces the risk of the portfolio because it does not depend on just one or two assets.
Improving yield. Diversification can help improve a portfolio's return, as it allows investors to invest in assets with higher profit potential.
Diversification. Diversification allows investors to invest in a variety of assets, which can help them take advantage of new opportunities.
How to diversify the investment portfolio?
There are several ways to diversify your investment portfolio. One way is to purchase mutual funds, which allow investors to invest in a variety of assets at once. Another way to diversify the investment portfolio is to purchase shares and other securities of companies from various fields.
The best way to diversify the investment portfolio depends on the needs, investment horizon and goals of the investor.
* The above should not be construed as investment advice
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