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Investing & the Stock Market vocabulary · Portfolio & Risk

Diversification

Meaning in investing & the stock market, with examples

/daɪˌvɜːrsɪfɪˈkeɪʃn/nounCore term

In investing & the stock market, diversification means: Spreading money across different investments, sectors, countries or asset classes so that a loss in one of them has a smaller effect on the whole portfolio.

In Turkish: çeşitlendirme, riski dağıtma

How it is used

A key idea in portfolio management, summed up by the saying 'don't put all your eggs in one basket'. Advisers and fund documents talk about the benefits of diversification and a lack of diversification. The verb is 'diversify' and the adjective is 'diversified'.

Example sentences

  1. Holding only bank stocks gives you very little diversification.

  2. Global diversification reduced the impact of the local sell-off on our fund.

Common collocations

  • benefits of diversification
  • lack of diversification
  • international diversification
  • achieve diversification
  • asset allocationThe way an investor divides money between different types of assets, such as shares, bonds, gold and cash, based on goals, time and attitude to risk.
  • portfolioAll the investments that one person or organisation owns, such as shares, bonds, funds and cash, seen together as a whole.
  • asset classA group of investments with similar features that tend to behave in similar ways, such as shares, bonds, cash, real estate or commodities.
  • risk toleranceHow much loss or how big a swing in value an investor is willing and able to accept in exchange for the chance of higher returns.

More terms: Portfolio & Risk

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This page explains English vocabulary for learners. It is not financial advice.