Diversification
Diversification is a risk management strategy, created to reduce the risk related to investors portfolio.
Investing in variety of securities such as bonds, stocks, note or debentures, you can dramatically reduce the risk, because not all of the owned securities will move up and down at the same rate and at the same time. The positive movement of one security is used to neutralize negative movement of another.
Some mathematical analysis proved that well diversified portfolio of 25 or 30 securities can gain highest yield.
Despite all the good sides of diversification, well diversified portfolio is usually very expensive. If you want to obtain healthy diversified portfolio and you don’t have enough money to do it yourself, you can always consider investing in mutual funds which are a good way to gain risk-secure portfolio.
| Related Terms: Staggered Maturities |
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