When it comes to managing investment risk, having a mix of stocks (Blue-chip and Multi-bagger stocks, for example) in different industries (Chemicals and Pharmaceuticals) in different market cap (Large and Midcap) can help protect your portfolio from losing value in the long run and give you an optimum return.
'If you have just one investment in one industry and it performs poorly, you could lose all your money.'
Why diversification works…
By having a mix of investments, also called diversification, the returns you earn on investments that perform well can balance out the losses on investments that perform poorly.
Diversifications works because when markets fall, the consumer goods, defensive stocks do not fall much relatively. Diversification is a smart way of spreading out your risk.
Having a balanced mix of stocks can reduce overall volatility of your investment portfolio which can lessen the chances of experiencing a big overall loss.
Top 4 reasons to diversify
- Different types of investments perform differently.
- World events affect some investments more than others.
- Choosing a mix of investments means your portfolio has a smaller overall combined risk, compared to the individual risks of investments.
- Without diversification, your portfolio is taking on unnecessary risk.
Secure your portfolio and your financial goals by opting for a combination of WODS advisory services. We aspire to provide you with consistent quality guidance, especially during the prevailing uncertainty.
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Regards,
Team WODS,
Team WODS,
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