ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. It aims to minimize losses by investing in different areas that would each react differently to the same event.

Detailed explanation-2: -Diversification involves spreading your investment dollars among different types of assets to help temper market volatility. As a simple example, all equity (or stock) investments and most fixed income (or bond) investments are subject to market fluctuation.

Detailed explanation-3: -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-4: -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-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.