Diversification across different asset classes can help lower investment risks. For example, a market downturn would cause stock prices to fall. If you had invested solely in stocks, you could be badly affected. But if you had diversified into bonds, your portfolio would be less affected by the downturn, as bonds tend to fare better than stocks when economic conditions are not as positive.
Unit trusts provide diversification benefits. They invest in a mixture of stocks and bonds with different risk levels.
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