What is diversification from an investment perspective? What will be

QUESTION

What is diversification from an investment perspective?

What will be an ideal response?

ANSWER

Answer: Diversification is owning a variety of different securities types in an investment portfolio. Following this approach means that a serious decline in the value of a particular security will not have a dramatic impact on the entire portfolio.
Explanation: In the strategy of diversification, securities are selected for an investment portfolio in such a way that a loss in one investment won’t have a devastating impact on the entire portfolio.