Diversification Definition

Learn more about Diversification

Diversification stands as a fundamental principle in ETF investing, embodying the strategic spread of investments across various asset classes or sectors to reduce risk exposure. ETFs inherently facilitate diversification by holding a basket of securities, mitigating the impact of poor performance or volatility in any single holding on the overall portfolio. Diversified ETF portfolios offer investors the potential for stable, long-term growth by minimizing the influence of specific market fluctuations. Understanding the benefits of diversification is essential for investors seeking to construct resilient and balanced portfolios that can withstand the dynamic and unpredictable nature of financial markets.

Related Terms

Asset Allocation, Custom Basket