Final answer:
Diversification is a recommended strategy for investors in the context of savings and investing. It involves spreading investments across different companies to reduce risk and cancel out extreme value fluctuations. However, it does not guarantee economic success.
Step-by-step explanation:
Diversification is a strategy that is strongly recommended in the context of savings and investing. It involves spreading investments across a wide range of stocks or bonds from different companies, rather than investing in a single company. By diversifying, investors can reduce the risk associated with individual firms and potential losses due to unfavorable conditions or poor decision-making. This strategy follows the old proverb: 'Don't put all your eggs in one basket.'
The benefits of diversification include the tendency to cancel out extreme increases and decreases in value. When some companies in a diversified portfolio do well, they can offset the underperformance of other companies, resulting in a more stable return on investment. However, it's important to note that diversification does not guarantee economic success, as the overall performance of the portfolio will still depend on the performance of the companies and market conditions.