Stock Market Investors » Glossary of Stock Terms » What is Diversification?

What is Diversification?

One of the most important things that you should keep in mind when you construct your investment portfolio is diversification. The latter represents the spreading of investments among various asset classes, such as stocks, bonds, cash and others.

Diversification protects the investor to a great degree from losses. This means that if one investment falls it will be compensated by a rise in another investment. This will happen since usually different asset classes move in a different fashion.

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