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Liquidity diversification |
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Liquidity diversificationInvesting in a variety of maturities to reduce the price risk to which holding long bonds exposes the investor.Liquidity diversification Similar MatchesIndirect diversification benefitsIndirect diversification benefitsDiversification benefits provided by the multinational corporation that are not available to investors through their portfolio investment. Principle of diversificationPrinciple of diversificationThat portfolios of different sorts of assets differently correlated with one another will have negligible unsystematic risk. In other words, unsystematic risks disappear in diversified portfolios, and only systematic risks persist, those related to particular assets. International diversificationInternational diversificationThe attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns. Cone of diversificationCone of diversificationSee diversification cone. DiversificationDiversificationInvestment jargon for not keeping all your eggs in one basket. Diversification implies that you distribute your capital among various assets to reduce loss if, through bad luck or judgement, one of them fails you.There are four main areas of risk to think about.Asset allocation: spreading your investments among different classes of asset (bonds, equities, property etc)Shares: spreading your stock investments over a sufficient number of shares (or invest in a diversified collective fund)Sectors: making sure the shares you invest in are in companies operating in a variety of sectorsCountries: getting some exposure to economies outside the UK as well as in the UKMost people agree that diversification is essential to reduce risk. There is an argument that to make exceptional returns, you have to concentrate your investments - the big winners theory. 'Put all your eggs in one basket and watch that basket very closely'. Further SuggestionsDiversificationUnique Diversification Benefit Efficient diversification Markowitz diversification Naive diversification Currency diversification Diversification cone Sector diversification |
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