Definition
Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. The rationale is that a diversified portfolio will, on average, yield higher long-term returns and lower the risk of any individual holding or security.
Example
Instead of putting all money in tech stocks, a diversified portfolio might include stocks from multiple sectors, bonds, real estate, and international investments.
FAQ
What is Portfolio Diversification?
Spreading investments across various assets to reduce risk.
Why is Portfolio Diversification important?
Portfolio Diversification helps investors evaluate risk management and make more informed decisions.