Significance of Diversity in Investment Portfolio

investment portfolio diversityIt is every investor’s goal to receive high returns from his investments while keeping the risk at its minimum, but one factor that every investor is not aware of is the role played by the diversity in investment portfolio in maximization of the returns and minimization of the risk.

The success of investments does not only depend upon the extent of capital invested or the investment avenues invest in, it depends mainly upon the way the investment portfolio is maintained. It is highly important to maintain a well diversified investment portfolio in order to ensure that the investment risk is managed efficiently.

Diversified Investment Portfolio

Investors can maintain a well diversified investment portfolio by making investments in numerous investment avenues that are not related to each other. This way, a negative trend in one investment will not influence the other investment. Many experts have tried to define a perfectly diversified investment portfolio but not all of them agree with the outcome. However, there is one factor that remains the same i.e.; the investment portfolio should hold securities that belong to independent groups and are not influenced by each other. Following is a brief introduction to the types of securities that can be included in a diversified investment portfolio: Continue reading