Diversification is a risk management strategy that aims to reduce investment risk by spreading out investments in
Question:
Diversification is a risk management strategy that aims to reduce investment risk by spreading out investments in a variety of assets (or asset classes, e.g. shares, bonds, commodities, real properties, etc.). People often think investment diversification performs magic - invoke it, and it will prevent portfolio losses.
1) To what extent do you think diversification can reduce market risk?
2) Do you think diversification is always a viable option for organizations, and are you using it in your organization (or personal investment)?
3) When do you think diversification will fail? Check some of the market indices. Do you think holding a diversified portfolio will immune one from portfolio losses (what about during the Global Financial Crisis period of 2007-08)?
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown