Difference Between Risk Pooling and Risk Sharing in the Diversification of the Portfolio

In this era of stock speculation, knowledge stocks has become very important. Risk management can help achieve more excellent benefits at the lowest possible cost, while improper use approaches lead to a counterproductive result. pooling and risk sharing are present in many domains, with entirely different definitions. Many people apply purposes these two means from other fields financial area, without knowing, or just ignoring, their difference. This article uses numerical results demonstrate difference between them by building portfolio models perform calculations. The true impacts applying methods reduce be found calculating respectively. Although do not sound different, they reflect effects when applied same portfolio. By understanding roles methods, investors will have better avoid severe consequences misusing them.