diversification theories

Diversification theories suggest that spreading investments across different assets, industries, or regions helps reduce overall risk. The idea is that by not putting all your money into one area, poor performance in one can be offset by better performance in others. This approach aims to stabilize returns and protect against significant losses caused by market fluctuations or specific sector downturns. Essentially, diversification is a risk management strategy that balances potential gains and losses, making an investment portfolio more resilient over time.