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 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-3: -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.

Detailed explanation-4: -Diversification reduces risk by making sure your money is spread over a variety of investments, so, if one of them suffers a negative effect, only a small portion of your wealth loses value.

Detailed explanation-5: -The practice of spreading money among different investments to reduce risk is known as diversification. Diversification is a strategy that can be neatly summed up as “Don’t put all your eggs in one basket.” One way to diversify is to allocate your investments among different kinds of assets.