Portfolio and Allocation Terms
Diversification
Spreading investments across different holdings to reduce the impact of any one position.
Also called: diversified portfolio
What it means
Diversification means not putting all your money into one investment, one sector, or one type of asset. The goal is to reduce the damage that can happen if a single company, fund, or market area performs badly. Diversification can lower certain risks, but it does not remove all risk.
Why it matters
This is one of the most important basic concepts in investing because concentration can increase the damage from being wrong.