Diversified Fund

Diversified Fund

A type of investment fund that contains a wide array of securities and is adequately diversified. A mutual fund classified as a "diversified fund" will actively maintain a high level of diversification in its holdings, thus reducing the amount of risk in the fund, since events that affect one sector won't have the same effect on other sectors. For example, the fund may restrict its purchases so it is not dominated by companies from one industry or representing one market capitalization size.

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A diversified fund contrasts with specialized or focused funds, such as sector funds, which focus on stocks in specific sectors such as biotechnology, pharmaceuticals or utilities, or in particular regions such as Asia or Europe. If you want to be broadly diversified across the entire market, diversified funds are a good place to start looking.

See also: Diversification, Fund Manager, Market Capitalization, Mutual Fund, Sector Fund, Systematic Risk, Unsystematic Risk