What are the Challenges of Financial Diversification?
While financial diversification offers numerous benefits, it also comes with its own set of challenges:
Over-Diversification: Spreading investments too thin can lead to diluted returns and increased management complexity. Cost and Complexity: Diversifying across multiple asset classes and regions can incur higher costs and require more sophisticated management strategies. Market Correlation: In times of global economic crises, the benefits of diversification may diminish as markets and asset classes become highly correlated.