Diversification
Beginner Level
Global
Financial Markets
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Definition
An investment strategy that spreads investments across various assets to reduce risk.
Detailed Explanation
By investing in different asset classes, sectors, and geographies, investors can reduce the impact of poor performance in any single investment. The saying "don't put all your eggs in one basket" captures this concept.
Example
An investor divides portfolio: 40% stocks, 30% bonds, 20% real estate, 10% gold.
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