answersLogoWhite

0

Diversification of risk means reduction of risk.

Merely reducing risk (and thereby reducing return proportionately) doesn't amount to diversification.

Diversification in its true sense represents systematic reduction of risk in such a manner that return per unit of risk increases.

By K S JOLLY

User Avatar

Wiki User

16y ago

What else can I help you with?

Related Questions

What type of risk is avoidable through proper diversification?

portfolio risk


Diversification is an investment strategy to?

Diversification enables the investor to reduce risk by spreading investments among different companies and types of investing.


How does diversification affect financial institions credit risk exposure?

Generally, diversification helps reduce the overall credit risk exposure for financial institutions by reducing their overall expected chargeoff rates.


What Diversification is an investment strategy to?

reduce risk by spreading investments among several assets.


What are the characteristics of diversification?

Diversification involves spreading investments across different assets or securities to reduce risk. By investing in a variety of assets, such as stocks, bonds, and real estate, investors can minimize the impact of any single investment's performance on their overall portfolio. Diversification can help to increase potential returns while lowering overall risk.


How is diversification related to risk and return?

Diversification is related to risk and return because it involves spreading investments across different assets to reduce risk. By diversifying, investors can potentially lower the overall risk of their portfolio while still aiming for a competitive return. This strategy helps to minimize the impact of any single investment performing poorly, thus balancing the trade-off between risk and return.


How can diversification help you deal with risk in your investment portfolio?

Diversification can help reduce risk in your investment portfolio by spreading your investments across different asset classes, industries, and geographic regions. This way, if one investment performs poorly, the impact on your overall portfolio is minimized.


Does Coca-Cola invest in new ventures?

it can invest in new ventures because to reduce the risk,by diversification


Why are mutual funds popular among investor?

Reduce risk, portfolio diversification, low transaction cost


What are the two key ideas of modern portfolio theory?

The two key ideas of modern portfolio theory are diversification and the trade-off between risk and return. Diversification involves spreading investments across different assets to reduce risk, while the risk-return trade-off suggests that investors should seek an optimal balance between risk and potential return based on their risk tolerance.


What is lack of diversification?

Lack of diversification refers to an investment portfolio that is not spread out among different asset classes or securities. This increases the risk because the portfolio is more exposed to the performance of a single asset or market. Diversification helps to minimize the impact of market fluctuations on the overall portfolio.


How does diversification impact the level of risk in an investment portfolio?

Diversification reduces the level of risk in an investment portfolio by spreading out investments across different assets. This helps to minimize the impact of any one investment performing poorly, as losses in one area may be offset by gains in another.