The essentials2 min read
DiversificationGerman: Diversifikation
Diversification means spreading money across different investments to reduce dependence on individual risks.
In plain language
You can diversify across companies, countries, industries and asset classes. What matters is how closely their returns move together. Diversification can reduce individual investment risk but does not prevent every market loss.
Let’s make it concrete
Ten stocks from the same industry may react similarly. A portfolio spanning industries and asset classes has different sources of risk.
Simplified example for illustration.Worth understanding
Many holdings do not automatically mean broad diversification. Overlaps and common risk factors still matter.
Read more from official sources
For further learning and reference:
Financial education for orientation. No individual investment, tax or legal advice.
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