• Every investor is interested in receiving a stable profit with minimal risks. Every trader has thought about how to protect their capital. Diversification is carried out for this purpose. The goal of this procedure is to minimize all economic risks that can potentially lead to financial losses. The essence of diversification is to distribute investment funds across different projects. Just like the well-known proverb says, “you can’t put all your eggs in one basket.”

Fundamentals

• The market is designed in such a way that it is impossible to make a 100% effective forecast. Accordingly, it is impossible to completely avoid losses. The investor’s task is to form an investment portfolio in such a way that in the end (minus losses) it still remains in profit. Monetary losses on one investment should be compensated by the total profit on other projects.

Investment diversification techniques

• Instrumental. This approach involves distributing the deposit between several projects. For example, 30% in Forex, 30% in real estate, 25% in shares of promising companies, and the remaining 15% in high-risk areas, experimental projects with a high percentage of profit. Spheres of activity should not overlap, i.e. you need to invest in areas independent of each other. In this case, problems in one area will not affect the situation in another sector.
• Institutional. Within one instrument, the investment is distributed among different companies. For example, if you invest in accounts managed by other traders, that is, the money must be distributed between different managers. It is also recommended to open accounts with different brokers.
• Risky. Within one instrument, the investment volume must be distributed among different risk levels. Let's consider an example with managing accounts. A competent investor should distribute their funds approximately as follows: 33% on low-income accounts, 33% on balanced solutions, 33% on risky but high-profit ones. Thus, if part of the funds transferred to the manager with aggressive trading is lost, the total income on the investment portfolio will allow you to make a profit due to 66% of investments in less risky instruments.

Risk classification

• Existing risks are conventionally divided into two categories: systemic and non-systemic. The first category includes risks that affect the entire economy as a whole, which affects almost all areas. A typical example is the global financial crisis of 2008, when there was a decline in production and business activity throughout the world.
• Non-systemic risks affect a specific narrow sector of the market. For example, this could be an unexpected bankruptcy of the company in which the funds were invested. The goal of diversifying the investment portfolio is to protect primarily against non-systemic risks. Forming an investment portfolio consisting of 10-15 instruments allows you to reduce non-systemic risks by approximately 80-90%.