Diversification is a crucial investment strategy that involves spreading investments across various asset classes, industries, and geographies. This approach helps to reduce the overall risk associated with any single investment. By diversifying your portfolio, you can potentially limit the impact of negative performance in one area on your overall returns. This is particularly important in the stock market, where individual stocks can experience significant fluctuations. A well-diversified portfolio can help to smooth out returns over time, reducing the impact of short-term market volatility. It’s important to remember that diversification doesn’t guarantee profits, but it can help to manage risk and potentially improve long-term investment outcomes.
