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Diversification

In risk management, the act or strategy of adding more investments 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. This may also reduce the expected return on a portfolio, but it depends on level and type of diversification. There are two main types of diversification. Horizontal diversification involves investing in similar investments. Examples include investing in several technology companies or in different types of bonds. Vertical diversification involves investing in very different securities; for example, one may choose to invest in securities traded in different countries, or in both winter clothing and swimsuit companies. Both types of diversification may be as broad or as narrow as the investor chooses. In general, broader diversification equates to less risk and less return. See also: Markowitz Portfolio Theory.

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.
References in periodicals archive ?
The Government sought to find solutions to enhance public expenditure through diversifying sources of income and utilizing oil revenues in supporting non-oil sectors, such as tourism, agriculture, fisheries and manufacturing industries.
Based on the aforesaid, we can say that diversifying sources of income needs a real partnership between the private and public sectors.
Guyana this year is aiming to expand output in the traditional industries of sugar, rice, mining and manufacturing, while diversifying the national economy.
By diversifying our client base to include both public and private sectors, while expanding our service lines, ACC has developed expertise on a much broader scale, which positions us to take advantage of the current upswing.
More than 6,900 farmers in the North-East and Yorkshire and Humberside are now diversifying into non-food businesses such as horse-riding, farm shops and tourism.
Fund Manager Bernice Behar says that "by diversifying your assets between countries, you take advantage of growth in different marketplaces over time." She notes that the fund's specialty is investing in foreign retailers.
"Realistically, the object of diversifying single-industry towns has been largely ineffective," said Don Allan, manager of the Northeastern Ontario Chambers of Commerce.
* Revitalization strategy for strengthening and diversifying retail outlets and arts/entertainment venues (including cultural uses such as art galleries, jazz clubs, etc.) throughout the Fulton Corridor, and possible incentive programs, streetscape enhancements, etc.
Derivatives are very appropriate today to the problem of diversifying or hedging concentrated positions.
"Many individuals and small businesses should consider diversifying their liabilities to include both fixed- and variable-rate borrowings.
Although it's true, by definition, that funds are diversified, some pros suggest that this year you might consider further diversifying the types of funds you buy.
In addition, many clubs, such as the Washington Women's Investment Club (WWIC), know that diversifying helps to balance a low-risk tolerance with a desire for maximum returns.