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Horizontal Diversification |
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Horizontal Diversification In risk management, the act or strategy of adding more investments of like kind to one's portfolio to hedge against the investments already in it. Ideally, this reduces the risk inherent in any one investment, and increases the possibility of making a profit, or at least avoiding a loss. That is, horizontal diversification involves investing in similar instruments. Examples include investing in several technology companies or in different types of bonds. Horizontal diversification may be as broad or as narrow as the investor chooses. In general, broader diversification equates to less risk and lower return. See also: Markowitz Portfolio Theory, Vertical diversification. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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