Home Forums General Discussion Tips for Diversifying Your Portfolio Reply To: Tips for Diversifying Your Portfolio

#103055
kevinvholloman
Participant

Thanks for the advice and information you shared. But I want to add a little. It seems to me that many simply do not understand what diversification is.
So – diversification is a risk management strategy when investing on the stock exchange. Risk for an investor is a situation in which he either does not receive the expected return on his investments or loses part of these investments themselves because the exchange price of his assets has fallen. On sites that specialize in finance, you can always get more info.
Diversification helps to reduce such risks due to the fact that the investor does not invest in any one asset, but collects a portfolio of many different exchange instruments that have little to do with each other. Then, even if one of the investor’s securities falls in price, others are likely to grow – and the yield on them will eventually cover the losses that have arisen.
But diversification is not just buying securities of different companies. For example, a portfolio will not be diversified if it contains only shares of Gazprom, Total and Chevron, because although these are companies from three different countries, they all belong to the same industry – oil and gas. If the price of oil falls, then the investor’s entire portfolio will become cheaper.
Proper portfolio diversification involves the purchase of securities of companies from different countries and from different sectors of the economy – then there is a possibility that they will not react in the same way to the same events and will grow or fall synchronously.

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