Diversification
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| Spreading one's assets across a wide variety of investments within a portfolio to minimize the impact of any one security on overall portfolio performance and to reduce the overall risk. Dividing investments among a variety of securities with different risks, rewards, and correlations in order to minimize risk. See what is diversification for more information. |
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Additional Comments:
A portfolio strategy designed to reduce exposure to risk by not putting too much of the portfolio’s value in any one type or group of stocks, which could all move negatively in the same direction. The ultimate goal of diversification is to reduce or mitigate risk of loss in a portfolio.
Risk becomes mitigated by the fact that not all stocks will move up and down in value at the same time or at the same rate. Diversification reduces both the upside and downside potential and allows for more consistent profi ts over a wide range of markets. |
Related Terms: | ||
Hedging A strategy designed to reduce investment risk using call options, put options, short-selling, or futures contracts. ... Diversification Rule Do not invest more than 30 percent of the total value of your portfolio in any ... Risk Management The process of managing trades by hedging risk. ... | ||
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