Glossary

Investing

Diversification

Diversification means spreading investments across assets, sectors, countries and currencies whose behavior isn't perfectly correlated.

It reduces specific risk — the risk that one company or country underperforms — without giving up the expected return of the market as a whole.

It doesn't remove market risk: in major crises, almost all risk assets fall together, and that's where bonds and cash provide protection.

Related terms

  • Volatility — Volatility measures how much an investment's value swings around its average: higher volatility means bigger short-term ups and downs.
  • Risk profile — Risk profile is the level of loss an investor can bear without jeopardizing their goals (capacity) and without selling in a panic (tolerance).
  • Rebalancing — Rebalancing is periodically adjusting a portfolio back to its target split between asset types.

Bring it to your own numbers

netclariq applies these concepts to your real accounts, debts and investments, with simplified double-entry bookkeeping and without asking for your bank credentials.

Educational content. netclariq does not provide financial, investment, tax or legal advice.