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Managing my investments
Managing my investments

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3.2 Diversifying investments dilutes risk

In this and the next few sections, you will explore how the trade-off between risk and return can be improved by holding a mixture of shares or other investments in a portfolio. This can be viewed as part of the third stage of the investment planning model – the process of deciding on investment strategies that fit with our time horizons and risk appetites. Let’s look first at the subject of diversification.

The analysis you need to undertake here and in the next two sections is a little complex, so there will be animations to guide you.

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