A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction. The goal of diversification is to reduce the risk in a portfolio. Volatility is limited by the fact that not all asset classes or industries or individual companies move up and down in value at the same time or at the same rate. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions.

Use diversification in a sentence

You should always be looking for ways to use diversification so that your business is never considered to be racist.

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My friend said her investment broker told her that her portfolio needed diversification so as to reduce the risk of one of her investments from reducing the value of the whole portfolio.

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I wanted to ensure that I had good diversification in my retirement account so if one segment struggled (i.e., international stocks), I'd have other portions to balance it.

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