Portfolio diversification helps investors avoid large downturns of investment outcomes. It simply means a reduction of risk associated with wealth, without necessarily decreasing returns. Effectively, it falls with the law of dispersion (aka risk). If one security moves one way, there is merit in choosing an inversely correlated asset that may move the opposite way, at a smaller degree. But it is very important to denote that diversification is neither good nor bad in certain situations, because even the most diverse portfolio can still have negative returns, given potential market conditions.
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