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Diversification means spreading your money among many investments to lessen risk. The idea is to avoid a situation in which your investments are concentrated in too few holdings. If big declines happen in the value of just one or two of them, this could wreck your portfolio.
For instance, you might strive for a mix of stocks that tend to fare well in different economic environments. There are strong, stagnant, declining, and inflationary economies. Perhaps you want to blend growth and income stocks in the portfolio, and add a dash of small-company and emerging-markets stocks. The appropriate blend of stocks depends on personal circumstances, including:
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