Importance of diversification from "summary" of Let's Talk Mutual Funds by Monika Halan
Diversification is the simplest and most effective way to manage risk in your investment portfolio. It involves spreading your investments across different asset classes, sectors, and geographic regions to reduce the impact of any one investment underperforming. By diversifying, you can protect yourself from the negative impact of a single event or market movement. For example, if you invest all your money in one stock and that company performs poorly, you could lose a significant portion of your investment. However, if you spread your investments across multiple stocks, bonds, and other assets, the impact of one underperforming investment is minimized. Diversification helps you achieve a balance between risk and return by ensuring that your portfolio is not overly reliant on any...
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