InvestorQ : Do stocks also help me to reduce risk? What is diversification?
Maniish Lofar made post

Do stocks also help me to reduce risk? What is diversification?

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Crowny Pinto answered.
3 years ago
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Investing in shares adds diversity to the investment portfolio. The portfolio could now give investors several sources of income – from real estate, stocks, interest earned from bank accounts apart from his chief source of income. Also, you become less immune to cycles. For example, if you are fully invested in bonds and the rates go up then you will suffer bond losses. But if you are spreading money across equities, you are automatically diversified and your risk is reduced.

The Indian share market comprises a number of companies, enabling investors to distribute their investments rather than committing all their resources into one. If the losses of one company lead to the depreciation of some of their shares, the successes of the other would help balance out their losses. This works in favour of shareholders and investors in the long run. In fact, the best of investors in the world prefer equities due to its ability to diversify the portfolio and reduce the risk.

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