Glossary

Diversification is an investment strategy aimed at spreading risk by allocating funds across various assets, sectors, or geographic locations.

It helps reduce the overall risk of a portfolio by minimising the impact of any single investment's poor performance. The idea is that a diverse mix of investments is less likely to suffer significant losses at the same time, making the portfolio more resilient to market fluctuations. 📊

For example, an investor might diversify by owning stocks in different sectors (technology, healthcare, energy), bonds with varying maturities, and real estate investments in multiple countries.

Fun fact: The concept of diversification can be traced back to the famous saying, "Don't put all your eggs in one basket." This principle is a cornerstone of modern portfolio theory, which emphasises the importance of diversification in reducing risk and maximising returns. 🥚🧺