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In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.
Not sure if your investment portfolio is diversified enough? Here are six tips to help you change that.
Example investment portfolio with a diverse asset allocation. Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. [1]
Diversification may allow for the same portfolio expected return with reduced risk. The mean-variance framework for constructing optimal investment portfolios was first posited by Markowitz and has since been reinforced and improved by other economists and mathematicians who went on to account for the limitations of the framework.
Diversification doesn't entail making a whole bunch of dangerous investments and hoping they cancel out. That's the financial equivalent of stabbing your leg to cure your flu. 50.
Value averaging is an investment strategy that advocates adjusting how much you put into the market each month based on your specific goals and how your portfolio is performing. That type of ...
The fund invests broadly in the stock market with financial stocks leading the way, accounting for 22% of its total weight, followed by 13% for industrials, 12% for healthcare, and other sectors ...
An example of the former would be choosing the proportions placed in equities versus bonds, while an example of the latter would be choosing the proportions of the stock sub-portfolio placed in stocks X, Y, and Z. Equities and bonds have fundamentally different financial characteristics and have different systematic risk and hence can be viewed ...