New lessons have been learned in the past few months about diversification and the management of credit risk.
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Mutual funds, themselves a financial innovation from 1924 ( see page 124), give the small investor what large investors always could afford: professional management and diversification.
This implies that asset class diversification should always be a part of our investment management plan, while we remain mindful of both country and sector diversification.
Another wheeze was diversification into peripheral businesses such as waste management or renewable energy.
Diversification in investing is a mainstay of prudent portfolio management.
In other words, not only can you find low-correlation sector pairings to provide true diversification, they allow for a granularity in risk management that is unavailable in traditional equity strategies.
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Wendy Trevisani, associate portfolio manager with Thornburg Investment Management, says E-Trade will succeed with its diversification from pure trading into banking and lending products.
Much of Agilent's risk management, and future investment, rests in product and geographic diversification.
"Significant management changes have been implemented, a universal banking business model offers its own diversification attractions, whilst cyclical economic exposure and the lack of government ownership also appeal, " he said.
Citigroup (nyse: C - news - people ), which epitomized the diversification trend by combining insurance underwriting, securities, retail brokerage, consumer banking and asset management under one red umbrella in 1998 moved earlier this year to shed its life and annuity business.
Boeing, which moved its corporate headquarters from Seattle to Chicago 16 months ago to emphasise its diversification, is also forging ahead with ambitious plans to offer satellite-based air-traffic management services as soon as governments have the courage to adopt this technology.
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