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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.
Diversification involves spreading your money across a variety of investments and asset classes. A diversified portfolio helps to reduce risk and may lead to a higher return. Investments that move ...
Economic diversity or economic diversification refers to variations in the economic status or the use of a broad range of economic activities in a region or country. [1] Diversification is used as a strategy to encourage positive economic growth and development. [ 2 ]
Asset diversification has been described as "the only free lunch you will find in the investment game". [2] Academic research has painstakingly explained the importance and benefits of asset allocation and the problems of active management (see academic studies section below).
Diversification has the statistical effect of reducing overall risk. Types of financial investments. In modern economies, traditional investments include:
Stocks climbed last week, with the S&P 500 jumping 4%. The index is now up 9% from its October 12 closing low of 3,577.03 and down 19% from its January 3 closing high of 4,796.56.
Diversification (finance) involves spreading investments; Diversification (marketing strategy) is a corporate strategy to increase market penetration; Diversification of firms through mergers and acquisitions
Similarly, diversification can manage price risk, on the assumption that not all products will suffer low prices at the same time. In fact, farmers often do the opposite of diversification by planting products that have a high price in one year, only to see the price collapse in the next, as explained by the cobweb theory. External threats ...