How to Diversify Your Portfolio

When you buy insurance, the company's going to promise to compensate you something bad happens. But in return, you have to give something up for sure. In an insurance market, that price is called a premium. Most insurance isn't actualy fair though. With index funds, you get a diversified portfolio with low risk. We see it in other areas of our lives too. If you're wearing a tea shirt under your sweat shirt, and you've also got a waterproof coat with then you're ready if the weather gets warmer or if it starts raining. You've got a diversified clothing portfolio. Our third strategy for reducing our risks is to take out insurance.