Day trading strategies: the complete guide with all the advanced tactics for stock and options trading strategies. Find here the tools you will need to invest in the forex market

Wide Diversifications between Various Asset Classes
Diversification to numerous investors simply implies spreading their funds
through a wide variety of stocks in different sectors such as health care,
financial, energy, as well as medium caps, small, and large-cap companies.
This is the opinion of your average investor. However, a closer look at this
approach reveals that investors are simply putting their money in different
sectors of stocks class. These asset classes can very easily fall and rise
when the markets do.
A reliably diversified portfolio is one where the investor or even the
manager is watchful and alert because of the hidden correlation that exists
between different asset classes. This correlation can easily change with
time, and there are several reasons for this. One reason is international

---

markets. Many investors often choose to diversify their portfolios with
international stocks.
However, there is also a noticeable correlation across the different global
financial markets. This correlation is clearly visible not just across
European markets but also emerging markets from around the world. There
is also a clear correlation between equities and fixed income markets, which
are generally the hallmarks of diversification.
This correlation is actually a challenge and is probably a result of the
relationship between structured financing and investment banking. Another
factor that contributes to this correlation is the rapid growth and popularity
of hedge funds. Take the case where a large international organization such
as a hedge fund suffers losses in a particular asset class.
Should this happen, then the firm may have to dispose of some assets across
the different asset classes. This will have a multiplier effect as numerous
other investments, and other investors will, therefore, be affected even
though they had diversified their portfolios appropriately. This is a
challenge that affects numerous investors who are probably unaware of its
existence. They are also probably unaware of how it should be rectified or
avoided.