The Role of Diversification

The Role of Diversification

Diversification serves to reduce the overall volatility of a portfolio. 반려동물 관련주

It is one of the most effective risk management techniques because it addresses unsystematic risk, which is specific to a company, industry, market, or country.

Components of Diversification

Diversification can involve multiple dimensions:

  • Asset Class Diversification: Investing across stocks, bonds, real estate, commodities, and other financial instruments.
  • Sector Diversification: Spreading investments across different sectors such as technology, healthcare, energy, and finance.
  • Geographical Diversification: Investing in markets across different countries and regions to mitigate the risk associated with any single geographic location.