Question

Diversification is an investment strategy to __________.

Answer 1

To reduce risk of loss.

Answer 2

Answer:

Diversification is an investment strategy to reduce the risk of investment and to ensure that the person investing does not lose money.

Explanation:

It consists of distributing the money that a person, organization or company wants to invest in different assets with the aim of minimizing the risk.

By expanding investment options there is less chance of losing all the money invested. If a person invests money in one option, there are only 2 possibilities: win or lose. If the result is positive, the money invested will be recovered and profits may be obtained, but if there is a negative result, it is possible that the person investing loses everything. When investments are made in several options there are several possibilities of positive and negative results.

Diversification can be done through investment options that may be related to each other, but also that belong to different fields. This allows to compensate the low yield with those investments that have high profitability.