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Diversification helps mitigate risk from "summary" of Security Analysis: Sixth Edition, Foreword by Warren Buffett by Benjamin Graham,David Dodd
Diversification is a fundamental principle of sound investment strategy that is based on the idea of spreading investments across a range of different assets. By doing so, the investor can reduce the overall risk in their portfolio. This concept is rooted in the understanding that different assets tend to behave differently in response to various economic conditions. For instance, stocks may perform well during times of economic growth, while bonds may provide more stable returns during periods of economic uncertainty. By holding a mix of assets, an investor can potentially offset losses in one area with gains in another, thereby reducing the overall volatility of their portfolio. Diversificati...
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