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Why it is important to have diversification in a Portfolio?
Why it is important to have diversification in a Portfolio?
Why it is important to have diversification in a Portfolio?
The level of market risk may be reduced by distributing the investments into
difference asset classes that are non-correlated financial instruments. Non-correlated implies that the financial instruments are different to a degree
that they will not all fall in value at the same time. The scenario which a
financial advisor should aim for is one where when one set of instruments
falls, a complementary set of instruments are known to rise, thus providing a
degree of stability to the overall portfolio. Even further diversification may
be built into a portfolio by investing in different countries, markets,
sectors, industries, securities and currencies. The goal here is to protect the
value of the overall portfolio against a drop in price in a single security
and/or a market sector downturn.
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).