Diversification
Diversification means spreading your investments across different companies or asset types to reduce risk.
Quick reference:
Goal: Reduction of risk. Method: mix of shares and sectors. “Dont put all your eggs in one basket”.
Expanded explanations:
When you diversify, you avoid the danger of one company or sector dragging down your whole portfolio. For example, if you own only one mining stock and it falls, you lose heavily. If you own a mix of mining, banking, retail and ETFs, losses in one area can be balanced by gains in another.
Diversification doesn’t guarantee profits, but it helps smooth out the ups and downs of investing. For beginners, ETFs are a simple way to diversify instantly, since they hold dozens or hundreds of companies in one product.
Related links + Articles:
• ETF.