Diversification is important because it helps you manage investment risk. By diversifying your portfolio, you can:
- Lower the impact of any single investment performing poorly
- Benefit from the performances of different kinds of investments or sectors
- Potentially improve the risk/reward ratio of your portfolio
Remember — diversification won’t eliminate risk entirely, but it can definitely help manage it.
For information on the Diversification Score, and how it works, please go to this article.