ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Diversifying your investment portfolio is a key strategy for managing risk, optimising returns, and achieving your financial goals. By spreading your investments across different assets, you can reduce your overall investment risk, increase your potential for returns, and ensure long-term stability.

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 means lowering your risk by spreading money across and within different asset classes, such as stocks, bonds and cash. It’s one of the best ways to weather market ups and downs and maintain the potential for growth.

Detailed explanation-4: -The primary purpose of diversification is to mitigate risk. By spreading your investment across different asset classes, industries, or maturities, you are less likely to experience market shocks that impact every single one of your investments the same.

Detailed explanation-5: -The risks of diversification strategy Unlike market penetration strategy, diversification strategy is considered high risk not only because of the inherent risks associated with developing new products, but also because of the business’s lack of experience working within the new market.