Diversify

diversify

To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries.

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Diversify

To include a wide variety of investments in a single portfolio. This is done to reduce risk while affecting one's expected return as little as possible. One may diversify by buying securities of different companies in the same industry, or securities in different industries, or securities traded in different countries, or even different kinds of securities. Various methods have been devised to determine the appropriate amount of diversification; one of the most famous is Markowitz Portfolio Theory. In general, the amount to which one diversifies depends on the amount of risk one is willing to accept.