Diversification involves investing in different products across various asset classes in order to reduce portfolio risk while maximizing the expected return. Although optimal portfolio diversification seems quite easy to achieve thanks to the wide variety of loan products available nowadays, it’s very important to consider a series of aspects in order to select the right loan products for your credit union’s portfolio and avoid the pitfalls of over diversification.
Manufactured Housing News
For financial institutions like banks and credit unions, loans are a primary source of revenue as well as risk. One way to manage credit risk effectively is to implement different diversification strategies. Besides reducing the risk inherent in loan portfolios, diversification allows financial institutions to lower the risk of their overall activities and maximize returns.