http://www.TradingSystems.com <br />Everybody wants to invest money to earn higher returns. At the same time, they want to avoid risk. Risk cannot be avoided, but it can be reduced through diversification. <br /><br />Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The logic behind this financial technique contends that a portfolio of different kinds of investments on average will yield higher returns and pose a lower risk than any individual investment found within the portfolio. <br /><br />Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments neutralizes the negative performance of others within a portfolio. The benefits of diversification only occur if the securities in the portfolio are different investments at all times. <br /><br />The procedure each investor decides to diversify is through a process called asset allocation. Investors are constantly told to diversify their p
