Diversification

Not all investments perform well at the same time. Different investments react differently to world events and economy-based factors such as interest rates and business prospects. Thus, when one investment is down, another might be up. Having a variety of investments can help offset the impact poor performers may have on your portfolio, while taking advantage of the earning potential of the remainder. This process is referred to as ‘diversification’ but really entails simply implementing the old adage of ‘not putting all one’s eggs in the same basket’.