Diversification
Spreading investments across different assets so no single one can sink the whole portfolio.
Diversification means holding a mix of investments — different companies, sectors, asset classes, or geographies — so that a bad outcome in any one of them doesn't determine your overall result. It doesn't eliminate risk or guarantee returns; it reduces the odds that a single event wipes out a large share of a portfolio.
Worked Example
A portfolio entirely in one company's stock can lose 50% of its value on one piece of bad news. A portfolio spread across hundreds of companies via an index fund is far less exposed to any single company's bad day.
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