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: -In general, to diversify is to choose more than one thing; in investment, it means apportioning funds among various assets. If one asset takes a loss, the money invested in the others won’t be affected.

Detailed explanation-3: -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. These strategies are all about variety.

Detailed explanation-4: -A mutual fund or index fund provides more diversification than an individual security does. It tracks a bundle of stocks, bonds, or commodities.

Detailed explanation-5: -Spread your risk If you put all of your money into a single bond and the issuer declared bankruptcy, you’d lose some if not all your funds, too. Diversification helps mitigate the risk to you about such scenarios by choosing different investments and types of investments.