Diversification is important to reduce risk and maximize returns in investments from "summary" of The Concise Psychology of Money by Morgan Housel
Diversification is like a magic trick in the world of investing. It's the concept of not putting all your eggs in one basket, spreading your money across a range of different assets to reduce the risk of any single investment blowing up in your face. It's a simple idea, but one that is often overlooked or misunderstood by many investors. Imagine you have two investments: one in stocks and one in bonds. If you put all your money in stocks and the stock market crashes, you could lose a substantial portion of your investment. But if you have some money in bonds as well, they may perform better during a stock market crash, helping to offset some of your losses. This is the power of diversification at work. Diversification is not just about reducing risk, it's also about maximizing returns. By spreading your money across different types o...
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