Monday, August 3, 2015

Why Diversification?

Diversification is one of the central concepts in investments. Theoretically your money should not be locked in any one asset. It should be split to buy different types of assets like land, shares/mutual funds, gold, FD’s etc. The reason is no particular asset can keep delivering profits year after year consistently. There will be exceptional growth in some years and then it will be followed by sluggishness. This phenomenon is true in almost every and any assets class. So, if your investment is in a single asset, you make money only if that asset increases in value and at the same time, you also miss the chance to participate in any other asset boom. Hence, the risk you take is high.

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