there is one important analogy in investing “do not store a lot of eggs in one basket save in many baskets, because if one basket of eggs is broken then we still have savings in another basket” that’s how diversification in investment this strategy is useful to divide our investments in various instruments to minimize losses incurred in the event of price changes in the market, for example I allocate a large part of our money to invest in coal stocks because the price is low, which is estimated to have good prospects in the future, over time the price of coal stocks is exploring a fairly good movement, but there is one condition where the policy the government banned the export of coal which caused this stock to drop dramatically.
from the above points we can take the conclusion that this divergence is important to navigate the risks and achieve long-term stability, by dividing our assets into several investment models to help navigate the risk of losses that will arise, for effective diversification investors need to build funds into several asset classes such as stocks, bonds, real estate and commodities, not only one type of asft saia, but covering sectors, geographies and investment styles, we can allocate funds to government bonds or commodities such as gold, coal, nickel and others that complement each other if one goes down then there are still other commodity reserves
there is no exact science for proper diversification, because each individual must have a different background goal and risk tolerance, but some common assets are advised to diversify include
Stocks offer high profits, with many choices of commodities, as well as dividends, but fluctuating price movements need to be the consideration of conservative investors
Bonds provide fixed income as well as fixed interest with lower risk than stocks
Gold is a Safe-haven asset whose price tends to be stable against the movement of sociopolitical turmoil, and often strengthens when the stock market falls
Property business is a form of long-term investment with income from rent and value preciation, but it should also be considered the cost of maintenance and repair costs
commditas as discussed at the beginning provide protection against inflation
with the passage of time niali assets in the portfolio will change from the initial plan that we have made, reel melakuakna rebalancing to ensure the portfolio is balanced with your risk tolerance and investment objectives, bsia by balancing the portfolio manually or with automatic rebalancing system that adjusts the portfolio in accordance with the rules set
Advantages
reduce risk by dividing funds into multiple assets
maintain portfolio stability with kineja complementary diverse assets
provides high opportunities from many sectors as well as asset classes
disadvantages
diversification gives maximum profit potential, if focusing on only one sector that produces we can get big returns if divided
high transaction costs if the portfolio is versified
if the portfolio focuses on only one or a few assets, it may be time to split into several assets.relying too heavily on one type of investment can increase risk, which can be bad in the long run
although diversification forgets one strategy that is beneficial for the long term we should still monitor our portfolio periodically at least once a year to ensure our assets remain relevant to awl goals, in the event of changes in market conditions or financial goals reblancing may be necessary
the division of investment assets is a powerful tool to reduce risk and increase the stability of our portfolio, especially in the midst of market uncertainty, although it does not eliminate risk this way gives the opportunity to achieve the profit potential of different assets by balancing the portfolio regularly