ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Diversification is the spreading of your investments both among and within different asset classes. And rebalancing means making regular adjustments to ensure you’re still hitting your target allocation over time. All are important tools in managing investment risk.

Detailed explanation-2: -Spread your risk Diversification helps mitigate the risk to you about such scenarios by choosing different investments and types of investments. Diversification doesn’t guarantee investment returns or eliminate risk of loss including in a declining market.

Detailed explanation-3: -Risk diversification is the process of investing across a range of industries and categories within one portfolio. This ensures that even if some assets perform poorly, other areas of the portfolio associated with different sectors can cover the loss.

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: -Diversification is a risk management technique that mitigates risk by allocating investments across different financial instruments, industries, and several other categories. The purpose of this technique is to maximize returns by investing in different areas that would yield higher and long term returns.