How diversification reduces volatility

Equity investments are potentially the most rewarding among asset classes for investors. But equities can be the most volatile. So, how do you make your investments less so? By diversifying your investments with asset classes and investments that are least correlated with each other. For example, gold prices tend to rise when there is negative sentiment from any global event, and when both stock and debt markets come under pressure. You can also add debt investments to your portfolio as fixed-income securities are typically more stable than equities. But remember, debt investments too can turn volatile where there is any global crisis.