Risk Reduction
The first and foremost advantage of using a diverse stock portfolio is that it reduces the risk of losing your investment. It is simply not possible for all the companies in the market to crash instantaneously, and therefore diversity is the best option for reducing the apparent risk in the market.
One thing to remember here is that reduction does not mean the elimination …show more content…
This means all of your stock positions are gradually building up, and therefore continuously increasing your income, while decreasing the risky options.
The availability of balanced growth ensures that you are able to take the advantage of any change in the market position. You are also able to achieve multiple financial goals, as you can easily employ short-term and long-term strategies together for successful stock trading.
Hedge Creation
The creation of a hedge fund is also a primary motive for creating a diverse stock portfolio. You can put a large portion of your wealth in dynamic stocks that keep changing all the time, and then balance them up with a hedge investment in reliable stocks that are sure to produce small gains every year.
Hedge investments are ideally set up, by investing in different market sectors. You should always select stocks that are not connected to each other. This ensures that a downtrend in one industry is sure to have no impact on the performance of your other stock investments.
Hedge funds also produce risk aversion. Successful stock trading implies that the amount of risk that you are willing to take is always