Diversification In Investments

Investing is a tool for building wealth, but it is not only for the wealthy. Anyone can get started on an investing program, and various mechanisms make it easy, to begin with, small amounts. Investing takes time—it is not a get-rich-quick scheme. It requires patience and proper guidance and Cedrus Wealth Partners will ensure that you get just that.

If you are a new investor, ‘financial diversification’ is exactly what you need in your investments.Many new individual investors can't tolerate the short-term fluctuations in the stock market. Hence, diversifying your portfolio is the best way to smooth out the ride.

Diversification is a risk- management technique that makes a variety of investments within a portfolio in order to minimize the risk. In simple terms,

• An investor should have a variety of assets in his portfolio. Like, if you have one asset in IT sector, another asset can be in a different sector. This will reduce industry specific losses.

• Vary the risk in your securities.Do not restrict yourself to choosing only blue chip stock. In fact, it would be wise to pick investments with varying risk levels; this will ensure that large losses are offset by other areas.

• Spread your portfolio among multiple investment vehicles such as cash, stocks, bonds, mutual funds and perhaps even some real estate.

Why diversification & the risks it involves?

Diversification can help an investor manage risk and reduce the volatility of an asset's price movements. However, no matter how diversified your portfolio is, risk can never be eliminated completely. You can reduce risk associated with individual stocks, but general market risks affect nearly every stock, so it is also important to diversify among different asset classes. The key is to find a medium between risk and return; this ensures that you achieve your financial goals while still getting a good night's rest.

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