Diversification is one of the hallmark of prudent fund management, simply stated it cautions against putting everything in one basket
The rationale for this simple but profound insight is that dividing your funds among different baskets will reduced the possibility of them losing money at the same time
Baskets should be defined in terms of Asset Class (see post on asset Class), a time deposit from Bank A is completely the same as a time deposit from Bank B as they belong to the same asset class
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