Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. The rationale behind this technique is that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Diversification strives to smooth out unsystematic risk events in a portfolio so the positive performance of some investments neutralizes the negative performance of others.
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Jenna Lofton, MBA is a stock trading and investment expert with over a decade of experience in the financial industry. She began her career as a financial advisor on Wall Street and now helps everyday investors make smarter financial decisions through StockHitter.com.
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