7.2.5 Diversification

Diversification means getting a mix of investments. It is a way to reduce risk when you invest.

It is never a good idea to put all your eggs in one basket. If you put all your money in one investment, it may rise or fall depending on a wide range of unpredictable factors. If you put your money into a range of investments and one or two lose money, the others may gain money to balance your investments.

You can diversify your investment portfolio by:

One way for investors to diversify their holdings is to buy products like mutual funds and exchange traded funds (ETFs). Both of these types of investment hold a wide variety of stocks, bonds or other products, so the performance of any single company might not have a large impact on the total value. However, the funds may still be limited to one particular industry or region. They do still rise and fall with market and economic conditions, so they do have risks and are not the best choice for all investors.

Diversification is an important investment strategy to help you avoid large swings in the value of your investments. A registered advisor can help you choose the mix of investments that is best for you.


Page details

Date modified: