Definition
Spreading money across different investments so that one bad outcome doesn't sink everything.
The story
If all your money is in one company and it fails, you lose it all. Spread across hundreds of companies, sectors and asset classes, a single failure is a small dent. Diversification reduces the risk of any one holding, but it can't remove the risk of the whole market falling.
Why markets watch it
It's one of the most widely taught principles in investing.
See it in the story
Connects to
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms