|
In financial management, what is portfolio diversification?
How to select different investment options so as to reduce risk of losing the invested money. For instance if an investor has a million rupees and he invests his total wealth in a single company's share, he would be exposed to greater risk. If the company goes out of business or faces serious loss, the investor is likely to lose all his investment. However, if that investor puts his total wealth into shares of ten different companies, the chances that all the ten companies would face loss is comparatively lesser and hence the risk for the investor is diversified and reduced. The rule of finance says do not put all your eggs in one basket, because if you drop the basket accidentally, you are likely to lose all the eggs.
Your Answer
DISCLAIMER
Paked and the contributors are not responsible for any errors contained and are
not liable for any damages resulting from the use of this material.
Disclaimer
|
|
