- Purpose: To educate readers on why diversification is crucial for managing risk in an investment portfolio.
- How to Expand:
- What Is Diversification: Define diversification as the practice of spreading investments across various asset classes (stocks, bonds, real estate, etc.) to reduce risk.
- Types of Diversification: Explain diversification by sector (technology, healthcare, energy), geography (domestic vs. international), and asset types (equities vs. bonds).
- Real-World Example: Show how diversified portfolios can perform better than concentrated ones during market downturns.
- Common Pitfalls: Discuss the dangers of over-diversification (too many assets that don’t perform well together) and under-diversification (putting all your eggs in one basket).
