Having a diversified investment portfolio is important to manage risks and potentially enhance your returns. By investing in a mix of assets, such as stocks, bonds, and cash, you spread the risk across different types of investments. This way, if one asset performs poorly, the impact on your overall portfolio is minimized, helping you achieve more stable returns over time. Diversification also allows you to take advantage of opportunities in different sectors and markets, increasing the potential for higher long-term gains.
I have recently started investing in stocks and I'm looking to expand my portfolio. I have heard a lot about diversification, but I'm not sure why it's so important. Can you explain its significance?
As a professional financial advisor, explain the importance of having a diversified investment portfolio.