Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio.
Diversification is a fundamental principle of investing that helps to reduce risk by allocating investments among various financial instruments, industries, and other categories. The idea is that a diversified portfolio will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.
Investors can diversify their portfolios by including a mix of asset classes such as stocks, bonds, real estate, and commodities. Additionally, investing in different sectors and geographical regions can further enhance diversification.
“Do not put all your eggs in one basket.” - Warren Buffett
By spreading investments across various assets, investors can protect themselves from significant losses in any single investment.
