Financial markets are characterized by uncertainty, asymmetric information and volatility of financial stocks. Diversification is an effective way of managing risk. It means to invest funds in various financial instruments rather than investing everything on a single investment opportunity. This enables to minimize the risk against fluctuation of markets.
[...] The benefits of diversification Diversification improves the performance savings of investors in today's marketplace; it can take advantage of opportunities that present in the market, as it also reduces the volatility of its portfolio. The diversification of the portfolio also maximizes the performance and reduces the risk associated with the loss of capital. The disadvantages of diversification If the investor adds too many elements to its portfolio, it affects the performance instead of improving it. The danger is to add the seemingly different, but that does [...]
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