What is a diversified investment portfolio
1.A diversified portfolio is one in which there are multiple investments across various asset classes, each with a different risk and return profile.2.It reduces overall risk to the portfolio as poor performance by a specific investment will have a lower impact due to multiple investments.
3.It allows one to take advantage of different trends and opportunities across asset classes, geographic regions and individual investments.
4.It provides consistent returns as no asset class outperforms consistently. If equity is on top in a given year, bonds may take over the position in the subsequent year.
5.As the portfolio grows and certain investments outperform others, one must rebalance the portfolio to ensure it remains well diversified.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
