Business and Personal Finance Dictionary

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• DIVERSIFICATION
  
  Diversification is an investment strategy in which you spread your investment dollars among different markets, sectors, industries, and securities. The goal of the strategy is to protect your the value of your overall portfolio in case a single security or market sector takes a serious downturn and drops in price. A well-diversified stock portfolio, for example, might include small-cap, medium-cap, and large-cap domestic stocks, stocks in six or more sectors or industries, and international stocks. Studies indicate that diversification can help insulate your investments against market and management risks without sacrificing the level of return you want. Finding the diversification mix that's right for you depends on your age, your assets, your tolerance for risk, and your investment goals.
  
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