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Principle of diversification |
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Principle 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.Principle of diversification Similar MatchesLiquidity diversificationLiquidity diversificationInvesting in a variety of maturities to reduce the price risk to which holding long bonds exposes the investor. Currency diversificationCurrency diversificationUsing more than one currency as an investing or financing strategy. Exposure to a diversified currency portfolio typically entails less exchange rate risk than if all the portfolio exposure were in a single foreign currency. Unique Diversification BenefitUnique Diversification BenefitReduction in the likelihood of financial distress for a conglomerate firm that comes with its diversified investments. Efficient diversificationEfficient diversificationThe organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk. Sector diversificationSector diversificationConstituting of a portfolio of stocks of companies in each major industry group. Further SuggestionsMarkowitz diversificationDiversification cone Diversification Naive diversification Cone of diversification Indirect diversification benefits diversification International diversification |
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