Definition Of Portfolio Diversity

True diversification protects you from loss because even if one of your investment holdings completely tanks it won t drag down the rest of your portfolio.

Definition of portfolio diversity. A diversified portfolio is a portfolio constructed of investment products with different risk levels and yields which seeks to lower the assumed risk and leverage a significant percentage of the variability of the portfolio performance. A diversified investment is a portfolio of various assets that earns the highest return for the least risk. Definition of diversity diversity is a community that consists of people from different backgrounds including race ethnicity religious beliefs appearances and abilities. Contrary to this diversity is not a collection of people who are all similar.

Diversity of portfolio definition diversity of portfolio portfolio diversity means spreading the investment risk by investing in a large number of stocks across various sectors. Investment diversification includes a variety of asset classes asset categories and individual investments. A typical diversified portfolio has a mixture of stocks fixed income and commodities diversification works because these assets react differently to the same economic event. The average annual return for each portfolio from 1926 through 2015 including reinvested dividends and other earnings is noted as are the best and worst 20 year returns.

But diversification also limits your potential upside. The concept of diversity stems from the popular adage it is not advisable to keep all eggs in one basket. It had an average annual return of 9 65. Diversity inclusion and belonging.

The most aggressive portfolio shown comprises 60 domestic stocks 25 international stocks and 15 bonds. The purpose of investment diversification is to reduce unsystematic risk.