Essays on Diversification Portfolio Assignment

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The paper "Diversification Portfolio" is a perfect example of a finance and accounting assignment. Diversification is simply defined as the portfolio strategy that is aimed at reducing the risk exposures through combining various investment varieties. For example, dealing with stocks, bonds and real estate are all processes that move towards achieving a similar goal, but with different mechanisms of business. With this form of diversification, there are low chances of volatility since not all the assets classes of the industries or even the individual companies can move up and down in their total value at the same period of time or rather at a similar time frame.

It, therefore, acts to positively minimize both the upsides and the downsides of investment value thus, allowing for only the more consistent performance in the wide range of economic performances. The upsides of investment value may include the profits, and since the strategies used to achieve a predetermined goal are several, all of the companies have to ensure an equitable share of this profit. The same case applies to the downsides which may include the losses. Diversification is mainly a type of strategic form that the managers are using in order to improve the performance of their respective firms.

The facts of studying and using this strategy are motivated by the two seemingly incredible circumstances; the first one is that diversification is continuing to be a very important strategy for corporate growth purposes. The second fact is that while the Management and Marketing systems always favor the related diversification samples, the Finance sector, on the other hand, makes a strong case against the use of corporate diversification.

In order to come up with a better understanding of diversification, it is advisable to address the contradiction that exists on the associative relationship between the use of diversification and the general firm performance. “ Diversification is a means through which the firm expands from its core businesses into other different product markets.


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