Investment dollars are like eggs — it’s risky to keep them all in one basket.
Rather than put themselves at the mercy of one investment’s ups and downs, many investors choose to diversify, spreading out their investments across multiple channels. A portfolio of multiple stocks can ease the extremes of the individual stocks’ volatility, and investors can decrease volatility even more by dividing investments across different asset classes: stocks, bonds, real estate, etc.
Darden Professor Rich Evans discusses the benefits of diversification in smoothing out the volatility of individual investments.
The BizBasics video series, created by the University of Virginia Darden School of Business, is designed to explain basic business concepts and common business buzz words.