What are the advantages of diversification?
There are several advantages of diversification in the portfolio. The primary advantage is that it reduces the risk, the second primary advantage is that it allows the portfolio investor to maximize the return on their investment. Another advantage of diversification is that it allows investors to redistribute or diversize their portfolio investment because their financial goals are changing over time.
One of the most important advantages of diversification is that it reduces the overall risk of portfolio. Diversification requires the investor to invest their money in various types of investment. The most popular investment opportunities include shares, bonds, mutual funds and deposit certificates. Although it is some of the most popular investment options, it is definitely not a comprehensive list of options.
Depending on the investor's goals, a diversification plan may be introduced to help the investor achieve their goals within the time frame that the investor has a set. Diversification is not a fixed form where there should be a certain percentageThis invested in shares, a certain percentage in bonds, certain mutual funds and a certain amount in the deposit. The percentage varies according to the goal that each individual investor has.
Finally, the benefits of diversification are balanced. Diversification balances the investment account to reduce risk. This means that if the portfolio action behaves badly, the rest of the portfolio maintains the portfolio at the same value or compensates for a loss of shares with one or more other types of investment well.
The second advantage of diversification is that it allows the investor to maximize the return on their investment portfolio. Because the portfolio is balanced and the money is distributed in different types of investment, when the specific investment is doing well, the benefits of the investor.
The third advantage of diversification is that nothing is stated in the stone. Investors should assess the portfolio diversification for quarterly, half -year or annually. During the toothOTO The evaluation can decide whether their investment objective has changed. If so, they can redistribute or re -balance the diversification of investment in the portfolio to meet the new goal.
It may also happen that a particular portfolio sector behaves badly. The evaluation process allows the investor to re -balance the portfolio to get out of poorly carried out investment and move money into investment options that have the potential to work better.