Diversification of risks
Risk diversification is designed to spread risk and return.
Risk diversification involves creating a portfolio of different risks based on a number of events, which, if some turn out well others turn out badly.
Diversification can be used to manage risks in a variety of ways:
Having a mix of higher and lower risk investments, products, markets and geographical locations.
Having a mix of equity and debt finance, of short and long-term debt, and of fixed and variable interest debt