LeoGlossary: Diversification

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LeoFinance
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An investment technique for managing the risk of a portfolio. This incorporates the idea of having a variety of different assets as investments. It is something that can be done by having stocks, bonds, cryptocurrency, and some commodities. The idea is to spread the money around so as to hedge against bear markets.

As for the return, diversification can provide strong yields when the assets are not correlated. This can be done by entering different markets. For example, securities that are tied to one country could mean that a poor economy crushes returns. However, by investing in many different ones, the return could be improved if some maintain strong economic conditions.

Investment advisors will take into a large number of factors regarding the investor when looking to diversify a portfolio. Things such as age, income, and tax bracket can all figure into the decisions.

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