Diversify , a Risk Mitigation Strategy

August 28, 2017

 

In the backdrop of the ongoing INFOSYS saga hopefully, this article will be topical. 

 

INFOSYS was the darling of the Indian stock market not so long ago. If Infosys results were good for a particular quarter, it set the trend for how the other stocks would be looked at by the market. It is one of the top held stock across all mutual funds, LIC, and many other institutional investors and also retail public investors.

 

However, the ongoing spat between the Board and the founders about how the company must be run has had a telling impact on the stock prices in the stock exchange. The stock which saw a one year high of 1100, is now at 870 levels (22nd Aug, 2017).  

 

Diversification of one’s investments across a variety of investment options would ensure that the fate of a single event like that of INFOSYS does not derail one’s overall portfolio or let it diminish the chances of reaching its goal posts…

 

 

Portfolio Diversification refers to spreading of one’s investments across a sufficient number and kinds of assets so that excessive risk pertaining to one asset does not impact the portfolio on the whole.

 

Diversification is an important PORTFOLIO RISK MANAGEMENT TOOL, which when practiced well can lead to a steady portfolio growth even when the external environment is extremely volatile. 

 

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