Investing & funds
What is Diversification?
Also called: Asset allocation
Hinglish mein padhein: Diversification kya hota hai?
Diversification spreads money across different stocks, sectors and asset classes so one bad outcome can't sink the whole portfolio.
Asset allocation — how much you hold in equity, debt, gold and cash — explains most of a portfolio's long-term risk and return.
Owning many stocks in the same sector is not real diversification.
Related terms
- Mutual fundA mutual fund pools money from many investors and invests it in stocks, bonds or both, managed by a SEBI-registered asset management company.
- HedgingHedging is taking an offsetting position — for example buying a Nifty put — to reduce the risk of losses in an existing portfolio.
- BetaBeta measures how much a stock tends to move relative to the market. A beta of 1.2 means it has moved about 20% more than the index on average.