Diversification

The spreading of risk by putting assets in several categories of investments, i.e., stocks, bonds, money market instruments, or a mutual fund with its broad range of stocks in one portfolio.

The investment in a number of different securities. To reduce the risk of loss inherent in investing. Diversification may be among types of securities, companies, industries or geographic locations.

The method of balancing risk by investing in a variety of securities.

Diversification is an investment strategy in which you spread your investment dollars among different sectors, industries, and securities within a number of asset classes.

A well-diversified stock portfolio, for example, might include small-, medium-, and large-cap domestic stocks, stocks in six or more sectors or industries, and international stocks. The goal is to protect the value of your overall portfolio in case a single security or market sector takes a serious downturn.

Diversification can help insulate your portfolio against market and management risks without significantly reducing the level of return you want. But finding the diversification mix that's right for your portfolio depends on your age, your assets, your tolerance for risk, and your investment goals.

An investment strategy that can reduce market risk by combining a variety of investments, such as stocks and bonds, which are unlikely to all move in the same direction at the same time.