Don't put everything in one basket!
True! but make sure the baskets are properly defined!
The objective of diversification is to minimize the risk of losing an entire portfolio by separating funds into different investments (baskets=asset class)
The three most common asset classes are cash, bonds and stocks
The key is non-correlation - meaning they don't react in the same way and at the same time to changes in market conditions,
for example the Central Bank announced a cut in interest rates
Cash Assets - effect is unfavorable as savings rate may fall further below inflation rate
Bonds - effect could be positive as bonds with higher coupons may appreciate in value
Stocks - positive as lower interest rates means lower borrowing cost and this could translate to higher operating margins which may justify a higher stock price, may not be applicable to bank stocks though as lower interest may mean tighter spreads
spreading the risk is still the best way to invest and minimize/eliminate losses
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