Strategy
Diversification
Definition
The strategy of spreading investments across various assets, sectors, and geographies to reduce risk. "Don't put all your eggs in one basket." Diversification can reduce portfolio risk without necessarily reducing expected returns.
Related Terms
Asset Allocation
The strategy of dividing investments among different asset categories like stocks, bonds, cash, and real estate. Proper asset allocation is the primary driver of portfolio returns and risk management.
Portfolio
The collection of all investments held by an individual or institution. A well-constructed portfolio is diversified across asset classes, sectors, and geographies to balance risk and return.
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