The importance of diversification in investment portfolios and the tips leading to risk-management

Abstract

This paper gives information about how to diversify portfolios which means having multiple kinds of securities and through this analyzes risk-management strategies by evaluating and mitigating potential risks. Risks can be grouped as systematic and unsystematic risks, and both of which can be urgent and lead to potential loss or unexpected gain according to the certain situations. Securities mostly can be influenced by market risk called beta which refers to the the correlation between the changes in market indexes and particular stock’s price. And this paper deals with some cases how this relationship can vary in terms of various markets.