BANKING AFFAIRS

Detailed explanation-1: -Unfortunately, even the best analysis of a company and its financial statements cannot guarantee it won’t be a losing investment. Diversification won’t prevent a loss, but it can reduce the impact of fraud and bad information on your portfolio.

Detailed explanation-2: -While diversification can reduce risk, it can’t eliminate all risk. Diversification reduces asset-specific risk – that is, the risk of owning too much of one stock (such as Amazon) or stocks in general, relative to other investments.

Detailed explanation-3: -Diversification involves spreading your investment dollars among different types of assets to help temper market volatility. By “smoothing out” market performance, you may be more likely to maintain a long-term portfolio position, potentially improving your chances of meeting key investment goals.

Detailed explanation-4: -Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce the volatility of your portfolio over time.

Detailed explanation-5: -Diversification lowers your portfolio’s risk because different asset classes do well at different times. If one business or sector fails or performs badly, you won’t lose all your money. Having a variety of investments with different risks will balance out the overall risk of a portfolio.