What are the risks of diversification?
An example of an AI chatbot conversation about the risks involved in diversification.
What are the risks of diversification in investing?
Diversification can reduce risk, but it also has its own risks, such as over-diversification and reduced returns.
What do you mean by over-diversification?
Over-diversification occurs when an investor holds too many assets, which can dilute potential returns and complicate management.
Are there specific sectors where diversification is riskier?
Yes, sectors that are highly correlated, like tech stocks, can lead to similar performance, reducing the benefits of diversification.
How can I effectively diversify my portfolio?
Consider a mix of asset classes, sectors, and geographic regions, and regularly review your portfolio to maintain balance.
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