Diversity of Investment
Diversity of Investment “Don’t put all your eggs in one basket”, goes the old adage. Based on your goals you may have allocated your investment into various asset classes such as equities, fixed income, insurance and commodities. But if you do not diversify within each asset class, the exercise, according to analysts, is sub-optimal. Portfolio Diversification Portfolio diversification concerns with the inclusion of different investment vehicles with a variety of features. However, the strategy can bring benefits to an investor only if the investments included in the portfolio include a small correlation with each other. A small correlation indicates that the prices of the investments are not likely to move in one direction. There is no consensus regarding the perfect amount of the diversification. In theory, an investor may continue diversifying his/her portfolio if there are available investments in the market that are not perfectly correlated with other investments in the portf...