ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -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-3: -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-4: -Consider Index or Bond Funds Investing in securities that track various indexes makes a wonderful long-term diversification investment for your portfolio. By adding some fixed-income solutions, you are further hedging your portfolio against market volatility and uncertainty.

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.