What is diversification?

While making any food recipe, you look for different ingredients that can balance the taste. Similarly, when it comes to your investment portfolio, you can have different types of investments that have :

• • Different risks

• • Different degrees of risk

• • Different returns

Also, all of your investments in the above example can face these risks if you have put all your money into just one investment product.

Alternatively, if some of your investments are in equity and some in debt, you have different risks impacting your investments that may not occur simultaneously.

Thus the risk is diversified.