Diversification
SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES
MARKETING MANAGEMENT
PROF V.V Ramasastry
“Research Paper- Diversification leads to success?”
Submitted By- Anil -15 Class-1B Batch- 2006-08 Semester-1st
Hypothesis: - Diversification leads to success.
Introduction to Diversification:-
Diversification is a familiar term to most investors. In the most general sense, it can be summed up with this phrase: "Don’t put all of your eggs in one basket." While that sentiment certainly captures the essence of the issue, it provides little guidance on the practical implications of the role diversification plays in an investor's portfolio and offers no insight into how a diversified portfolio is actually created. In this article, we'll provide an overview of diversification and give you some insight into how you can make it work to your advantage.
What Is Diversification?
Taking a closer look at the concept of diversification, the idea is to create a portfolio that includes multiple investments in order to reduce risk. Consider, for example, an investment that consists of only the stock issued by a single company. If that company's stock suffers a serious downturn, your portfolio will sustain the full brunt of the decline. By splitting your investment between the stocks of two different companies, you reduce the potential risk to your portfolio.
Another way to reduce the risk in your portfolio is to include bonds and cash. Because cash is generally used as a short-term reserve, most investors develop an asset allocation strategy for their
MARKETING MANAGEMENT
PROF V.V Ramasastry
“Research Paper- Diversification leads to success?”
Submitted By- Anil -15 Class-1B Batch- 2006-08 Semester-1st
Hypothesis: - Diversification leads to success.
Introduction to Diversification:-
Diversification is a familiar term to most investors. In the most general sense, it can be summed up with this phrase: "Don’t put all of your eggs in one basket." While that sentiment certainly captures the essence of the issue, it provides little guidance on the practical implications of the role diversification plays in an investor's portfolio and offers no insight into how a diversified portfolio is actually created. In this article, we'll provide an overview of diversification and give you some insight into how you can make it work to your advantage.
What Is Diversification?
Taking a closer look at the concept of diversification, the idea is to create a portfolio that includes multiple investments in order to reduce risk. Consider, for example, an investment that consists of only the stock issued by a single company. If that company's stock suffers a serious downturn, your portfolio will sustain the full brunt of the decline. By splitting your investment between the stocks of two different companies, you reduce the potential risk to your portfolio.
Another way to reduce the risk in your portfolio is to include bonds and cash. Because cash is generally used as a short-term reserve, most investors develop an asset allocation strategy for their