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What is diversification in finance?

In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.

What is diversification & why is it important?

Diversification is a common investment strategy that entails buying different types of investments to reduce the risk of market volatility. It's part of what’s called asset allocation, meaning how much of a portfolio is invested in various asset classes. Three of the most common asset classes are stocks, bonds and cash (or cash equivalents).

Why is diversification important in financial planning & investment management?

Diversification is a very important concept in financial planning and investment management. It is the idea that by investing in different things, the overall risk of your portfolio is lower. Instead of putting all your money into a single asset, spreading your wealth across different assets puts you at less risk of losing capital.

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Risk warning: Digital asset trading is an emerging industry with bright prospects, but it also comes with huge risks as it is a new market. The risk is especially high in leveraged trading since leverage magnifies profits and amplifies risks at the same time. Please make sure you have a thorough understanding of the industry, the leveraged trading models, and the rules of trading before opening a position. Additionally, we strongly recommend that you identify your risk tolerance and only accept the risks you are willing to take. All trading involves risks, so you must be cautious when entering the market.

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