how does diversification impact returns 
investing in a variety of different securities can help diversify a portfolio and potentially achieve a higher return without adding much additional risk by spreading out investments across different sectors and asset classes that are not highly correlated investors can minimize the risk of any single security negatively impacting returns indeed the math shows that proper diversification can reduce a portfolio s volatility while maintaining or potentially increasing its expected return the bottom linereturn is the gain or loss that an investment generates over a period of time a positive return indicates a profit while a negative return indicates a loss the return on an investment is usually quoted as a percentage and includes any income that the investment generates e g interest dividends as well as capital gains price increases to generate higher expected returns investors usually need to take on more risk of potential losses 