| In the world of share investments, no two | | | | many companies had to pull down the shutters. |
| opinions exist that diversification is a concept that | | | | Yet, diversification is one of the best solutions to |
| finds acceptance from majority of the investors. | | | | tackle risks in the share market. The experts on |
| Acknowledging this principle, most of the portfolios | | | | this subject provide some tips. One or more of |
| created by the investors or by brokers for the | | | | them may hold well at a particular time and save |
| benefit of their clients have 10-12 shares. With a | | | | your portfolio from suffering losses. |
| diversified portfolio, risk stands reduced, as the | | | | Investment diversification depends upon your |
| share values happen to rise or fall and there is no | | | | goals. The time that you have to reach the goal |
| relation between the two shares of the same | | | | and the capacity to invest regularly is the relevant |
| portfolio for variation in prices. Overall risk, | | | | factor. What is your expectation of the growth of |
| therefore, stands reduced, if not eliminated totally. | | | | your assets? Are you willing to take any risks and |
| Why diversification is absolutely necessary? | | | | if so the level up to which you will do so? The |
| The final goal in diversification is to improve | | | | same investor may have multiple goals. One at |
| performance, secure more profits, and manage | | | | the time of his marriage, and one at the age of |
| the risks that are inseparable part of the share | | | | 50 when the children seek admission in costly |
| market. There are two types of risks, | | | | professional colleges! If you are a retired person, |
| unsystematic risk and systematic risk. The | | | | protecting the principle amount is your major goal |
| former relates to a specific company. Unexpected | | | | and securing the maximum returns is the |
| issues can crop up in a particular company, such | | | | secondary goal. At that stage you are not willing |
| as a strike, natural calamities like fire or | | | | to take any risks at all. |
| earthquake, and abrupt slump in the sales due to | | | | Growth and income are like two arms of the |
| competitive technological innovations etc. A | | | | scale and they need to balance properly. A |
| diversified portfolio is an insurance against such | | | | harmonious blending of growth investments with |
| happenings, as all these can not happen | | | | those which produce income is ideal. |
| simultaneously in all the companies forming part of | | | | Let large and small companies form part of your |
| the portfolio. | | | | portfolio. Let new companies find place along with |
| The issues that affect the entire economy belong | | | | the well established ones. |
| to the latter category. Some of them are | | | | Take care of different segments; invest in |
| fluctuation in interest rates, wars and inflation. The | | | | unrelated industries and look out for the mix of |
| diversified portfolio has no solution for such risks. | | | | government and corporate investments. Invest |
| Experts and the researchers look at diversification | | | | internationally in companies based in different |
| from the angle of volatility of shares. Anything | | | | countries. Examine the balance sheet of some of |
| from 10-30 shares forms an ideal portfolio. In this | | | | the sluggish companies at present, but have the |
| age of internet evolution, many investors think in | | | | potential to turn the corner and produce better |
| global terms. Investments done outside the | | | | results in the not too distant future. |
| country carry the additional risks like political | | | | Stock brokers, financial consultants can assist you |
| uncertainty, currency inflation etc. | | | | in finalizing your diversification proposal when you |
| One issue is clear. The best of the stock | | | | explain to them your financial needs and |
| investment diversification is no guarantee to | | | | objectives. You can also do it yourself, but taking |
| enhance returns. It may fail to outperform a | | | | advice from the brokers who have wide |
| non-diversified portfolio. It does not ensure against | | | | experience in dealing with market conditions, is |
| market risks. So also, past performance of | | | | better. The gains that are likely to accrue will |
| companies is no guarantee for the future results. | | | | certainly outweigh the brokerage that you will pay. |
| In the fast-changing technological scene and | | | | Two heads are better than one in taking |
| intense competition in the export/import trade, | | | | important investment decisions. |