Types Of Diversification

Diversification is a technique which minimises the risk of investing by spreading investments across various financial instruments, asset classes, sectors and other categories. The aim is to minimise the chance of loss in the overall portfolio since different instruments react differently to market conditions. For example, the rising cost of petrol and diesel is good news for oil marketing companies, but bad news for consumers, since it leads to higher inflation and makes goods and services costlier. A diversified portfolio helps in balancing the overall returns by compensating for the losses in one asset class and/or sector with gains in another. Here are a few types of diversification. Among Assests This type of diversification aims to spread investments across different asset classes. Different asset classes react differently to the same market or economic condition....