Ask Leo : Does diversification matters in your portfolio to reduce risk

almost 2 years ago

What is Diversification?

Diversification is the way of spreading your investments around to avoid being a greater risk during the bear market or market fall. Cryptocurrency is known for its volatility and with diversification it reduces the risk of being affected on your portfolio.

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Not all cryptocurrency will go down at the same time but with diversification it will ensure that you have few wins and loses during the bear market and this prevent total loses.
This helps not to put your egg inside one basket. Just imagine with the issue of $Luna , someone who has its total life saves on $Luna will have a great regret but someone who diversify its portfolio will incur few loses and wins during the bear market.
Diversification is a great way to balance risks and not a way to make profit or one that prevents losses but helps to reduces the rate at which one incur loses.
Note: No mater how you diversify your portfolio , risk cannot be removed totally because of the volatility nature of cryptocurrency.