ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It is one way to balance risk and reward in your investment portfolio by diversifying your assets. 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-2: -Diversification is a strategy that mixes a wide variety of investments within a portfolio in an attempt to reduce portfolio risk. Diversification is most often done by investing in different asset classes such as stocks, bonds, real estate, or cryptocurrency.

Detailed explanation-3: -Portfolio diversification is the process of selecting a variety of investments within each asset class, which can help those looking for how to minimize their investment risk. Diversification across asset classes may also help lessen the impact of major market swings on your portfolio.

Detailed explanation-4: -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-5: -Use index funds to boost your diversification Index funds are a great way to build a diversified portfolio at a low cost. Purchasing ETFs or mutual funds that track broad indexes such as the S&P 500 allow you to buy into a portfolio for almost nothing.