... Non-systematic investment risks can be minimized; however, no one is immune from systematic risks, as they can impact nearly all markets, and an increased level of diversification will not help in this regard. According to modern portfolio theory, optimal diversification occurs when you add a twentieth asset. Estimates from Edwin Elton and Martin Gruber suggest that the average risk of a portfolio with a single asset stands at 49.2%, while with twenty assets, the risk decreases to 22%. Notably, if you expand your portfolio from 20 to 1000 assets, the ...

... others may rise and offset the losses. For instance, during the crisis of 2020, investments in the technology sector compensated for the losses incurred from the decline in the stock prices of tourism companies and airlines. Key Principles of Portfolio Diversification Asset class allocation: stocks, bonds, real estate, commodities, and cash. Geographic diversification: investments in companies and markets from different countries and regions. Sector diversification: selecting companies from various sectors of the economy....

... startups. Participation in pre-IPO projects, such as Open Oil Market, can also be an interesting option for diversifying a portfolio with a long-term growth perspective. 2. Include Stocks from Different Industries Stocks are one of the most popular assets for diversification. Investors often allocate their investments among stocks of companies from various sectors, such as energy, finance, technology, and consumer goods. For example, you may include shares of major Russian companies like Sberbank or Lukoil ...

... impact asset values and risk levels. To mitigate the risk of losses and preserve capital, it is crucial to approach the selection of investment assets thoughtfully and to employ diverse strategies. In this article, we will explore the key approaches to asset selection, effective diversification methods, and recommendations that can help reduce risks in a volatile economic environment. Investing in an unstable market poses challenges even for seasoned investors. Economic uncertainty, political instability, and various other factors ...

... buying more specific shares when prices are low and fewer when prices are high. Even with successful portfolio diversification, it is important to monitor the market and the companies you invest in to respond timely to any changes. To achieve portfolio diversification, seek asset classes with negative correlation. This way, if one asset starts to decline, others may rise.