noun

diversification

dy-VUR-si-fi-KAY-shuhn

Diversification (noun) means the practice of spreading money across a number of different investments, industries, asset types or countries, so that the fortunes of the whole holding depend less on any single one of them. Example: “The portfolio has almost no diversification: nine of its ten holdings are technology shares.”

noun

finance The practice of spreading money across a number of different investments, industries, asset types or countries, so that the fortunes of the whole holding depend less on any single one of them.

"The portfolio has almost no diversification: nine of its ten holdings are technology shares."

"Adding bonds and overseas shares gave the fund a degree of diversification."

business More generally, the act of expanding into new products, markets or activities rather than relying on one.

"Diversification into ready meals kept the bakery going through a poor summer."

How to use diversification

Learner’s notes

In plain EnglishNot putting all your money in one thing.

When to use it

Standard in finance and business writing; the everyday equivalent is the proverb about not putting all your eggs in one basket.

Memory tip

The verb is diversify and the adjective diversified; a diversified portfolio is one that has been spread widely.

Trace the full origin ↓

Easily confused with

asset allocation hedging → rebalancing concentration →

Common pairings

portfolio diversification geographic diversification lack of diversification diversification benefits

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The portfolio has almost no _____: nine of its ten holdings are technology shares.

Etymology

From diversify, from Latin diversus meaning turned different ways, plus the noun ending -ation.

Origin: English

Synonyms

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spreading risk asset allocation risk spreading variety expansion branching out broadening

Antonyms

concentration specialisation

Related words

kind development type attention increase focus sort species

Rhymes for diversification

region billion ablation allusion emulsion ideation novation abortion abrasion diffusion elocution extension

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Frequently asked questions

What is the difference between diversification and asset allocation?

Asset allocation is the decision about how much goes into each broad category — shares, bonds, cash, property. Diversification is about spreading holdings within and across those categories so that no single company, sector or region dominates. The two overlap, and asset allocation is one of the ways diversification is achieved.

Does diversification remove risk?

No. It reduces exposure to events affecting one company or sector, but it cannot remove risks that move whole markets at once, such as a broad downturn. That market-wide element is sometimes called systematic risk, and it remains however widely holdings are spread.

Can a portfolio be too diversified?

Some argue it can. Beyond a certain point, adding more holdings does little to reduce the effect of any one of them, while adding cost and complexity. This is sometimes described with the coined term diworsification.

What is the meaning of diversification?

"diversification" (noun) means the practice of spreading money across a number of different investments, industries, asset types or countries, so that the fortunes of the whole holding depend less on any single one of them.

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