Investing
Diversification
Spreading investments across different assets to reduce risk from any single one.
In more detail
Diversification is one of the foundational terms in investing. Understanding it clearly helps you read financial documents, compare products, and avoid the kind of small misunderstandings that compound into expensive mistakes.
An example
Imagine you are evaluating a typical financial product where this concept appears. Knowing exactly what diversification means lets you ask the right follow-up questions, compare two options on an even footing, and choose what is best for your circumstances rather than what sounds best in marketing copy.
Related terms
- Compound Interest — Interest calculated on both the original principal and previously earned interest.
- Dividend — A share of a company's profits paid to its shareholders, usually quarterly.
- Equity — Ownership in a company (stocks) or the value of a home minus the mortgage owed.
- ETF (Exchange-Traded Fund) — A basket of investments that trades on an exchange like a single stock.
Definitions are general and educational. Specific products and laws vary by country and provider — confirm with the issuer before making decisions.