Diversification in this context means spreading your investment risk between the various asset classes. In other words, not putting all your eggs in one basket.
Investors who are prepared to hold a combination of equities, bonds and money market instruments stand a greater chance of higher returns over the long term than those who invest only in conservative investments such as cash.
By combining
- the growth potential of equities with
- the higher income of bonds and
- the stability of money market funds,
- time horizon,
- risk tolerance profile and
- investment objectives.
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