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Investments & Financial Planning

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  4. Doesn’t diversification reduce rather than increase an investment portfolio’s return?

Doesn’t diversification reduce rather than increase an investment portfolio’s return?

Over the long-term, a diversified portfolio should outperform a portfolio which is too narrowly spread. Each type of investment performs differently within the same business cycle. Some investments in the mix might do very well and make up for the ones which do not. If you were invested in just one sector and it performed poorly, then your entire portfolio suffers.

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