Diversification Explained

Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. The rationale behind this strategy is that a diversified portfolio will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Benefits of Diversification

• Risk Reduction: Spreading investments reduces the impact of a poor-performing asset.
• Stable Returns: A balanced portfolio can provide more consistent returns over time.

Investors should consider their investment horizon and risk tolerance when implementing diversification strategies.