Diversification
What is Diversification?
Spreading money across many investments to reduce the impact of any one loss.
Understanding Diversification
Diversification lowers risk by holding assets that do not all move together. A loss in one holding is cushioned by the others.
It reduces company-specific risk but cannot remove market-wide risk.
FAQ
How many stocks make a portfolio diversified?
Studies suggest that 20 to 30 stocks across industries remove much company-specific risk, but a broad index fund holds hundreds.