What is the main benefit of spreading investments across different assets?

Spreading investments across different assets is a strategy known as diversification, and its primary benefit lies in managing risk effectively. By distributing investments among various asset classes, sectors, or geographic regions, investors can reduce the impact that any single investment will have on the overall portfolio. This is crucial because different assets often respond differently to market conditions; when one asset may be underperforming, another could be gaining value, thus balancing overall returns.

This strategy helps protect the investment portfolio from significant losses that could occur if all funds are concentrated in a single area. A well-diversified portfolio can lead to more stable returns over time, as volatility in one investment can be offset by stability or gains in others.

The other options do not accurately represent the primary benefit of diversification. Increasing transaction fees would be counterproductive and does not relate to effective risk management. Higher market volatility is something that investors typically want to avoid, rather than ensure, when managing a diversified portfolio. Finally, while diversification aims to reduce the likelihood of losses, it cannot eliminate all forms of investment loss. No investment strategy can guarantee against losses, which is an important point for investors to understand.