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What is diversification & how does it work?

Diversification is a strategy that mixes a wide variety of investments within a portfolio in an attempt to reduce portfolio risk. Diversification is most often done by investing in different asset classes such as stocks, bonds, real estate, or cryptocurrency.

What is a diversified portfolio?

Diversification is a risk management strategy that creates a mix of various investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt to limit exposure to any single asset or risk.

How can diversification be achieved in a portfolio?

Diversification can also be achieved by purchasing investments in different countries, industries, sizes of companies, or term lengths for income-generating investments. The quality of diversification in a portfolio is most often measured by analyzing the correlation coefficient of pairs of assets.

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Risk warning: Digital asset trading is an emerging industry with bright prospects, but it also comes with huge risks as it is a new market. The risk is especially high in leveraged trading since leverage magnifies profits and amplifies risks at the same time. Please make sure you have a thorough understanding of the industry, the leveraged trading models, and the rules of trading before opening a position. Additionally, we strongly recommend that you identify your risk tolerance and only accept the risks you are willing to take. All trading involves risks, so you must be cautious when entering the market.

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