DIVERSIFICATION Meaning and
Definition
-
Diversification is a term used in finance and investment that refers to the strategy of spreading investments across various assets or sectors to reduce risk and increase potential returns. It is the practice of creating a balanced and well-diversified portfolio, which means not relying on a single investment or a small number of investments.
The main objective of diversification is to minimize the impact of any potential loss that could occur from a single investment by investing in a variety of different assets, such as stocks, bonds, real estate, commodities, or even international markets. The rationale behind diversification is based on the principle that different assets perform differently under various market conditions. When one investment underperforms, others may still perform well, thereby offsetting the potential losses.
By diversifying, investors aim to achieve a more stable and consistent return on their investments over time and reduce the overall risk of the portfolio. It essentially means not putting all your eggs in one basket and instead spreading the risk across multiple baskets.
Diversification is not just limited to asset classes but can also be achieved within each asset class. For example, within stocks, an investor can diversify by holding shares in companies from different sectors or countries. In bonds, diversification can be obtained by investing in various types of bonds with different terms and issuers.
In conclusion, diversification is a strategy used by investors to mitigate risk and increase potential returns by spreading their investments across different assets or sectors.
-
Variation; the act of making various, or of changing forms; change; alteration.
Etymological and pronouncing dictionary of the English language. By Stormonth, James, Phelp, P. H. Published 1874.
Top Common Misspellings for DIVERSIFICATION *
* The statistics data for these misspellings percentages are collected from over 15,411,110 spell check sessions on www.spellchecker.net from Jan 2010 - Jun 2012.
Other Common Misspellings for DIVERSIFICATION
Etymology of DIVERSIFICATION
The word "diversification" originated from the Latin word "diversus", which means "different" or "diverse". The term evolved in English during the mid-17th century, with the suffix "-tion" added to form the noun. "Diversification" refers to the act or process of making something diverse, varied, or different.
Similar spelling words for DIVERSIFICATION
Infographic
Add the infographic to your website:
