Stay diversified to mitigate risk in your portfolio from "summary" of The Investment Answer by Gordon Murray,Daniel C. Goldie,Gordon S. Murray
Diversification is a fundamental principle in investing that is essential for managing risk in a portfolio. When you diversify your investments, you spread your money across different asset classes, such as stocks, bonds, and cash equivalents. This strategy helps to reduce the overall risk in your portfolio because it is unlikely that all of your investments will perform poorly at the same time.
By staying diversified, you can protect yourself from the volatility of individual investments or sectors. This is because different types of assets tend to react differently to market conditions. For example, when stock prices are falling, bond prices may be rising, providing a buffer against losses in your portfolio. On the other hand, if you only invest in one type of asset and it performs poorly, your entire portfolio could suffer significant los...
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