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Known colloquially by the expression “Don’t put all your eggs in one basket”, diversification is a common technique, particularly in cases that involve risk management in securities and bond markets. The approach of this method is to minimize the potential for loss by pooling assets with different risk weightings in the most risk-efficient manner. In this way, investors can decide what risk they are willing to accept. They will then weigh up their ‘risk appetite’ against the return they seek to earn; and create a weighted investment that meets these goals.

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