Finance Quick Answers
What is diversification in terms of investing?
Diversification simply means that not all of your eggs are in one basket. Your funds are spread over a variety of investment instruments. For example, diversification could mean that you own several stocks but they all come from various types of industries. It could also mean that some of your investments are in stocks, but some are in bonds, some in real estate, etc.
By having a variety of investments, your funds are
more protected. If a certain sector of the economy is
badly hit, you will have your other investments to "take
up the slack."
Dr. Joyce Cavanagh, Former Assistant Professor and State Specialist, Consumer and Family Economics
Last update: Monday, July 21, 2008