Diversification is a strategy that mixes a wide variety of investments in a portfolio in an attempt to reduce the portfolio’s risk.
Diversification is most often done by investing in different asset classes such as stocks, bonds, real estate or cryptocurrencies.
Diversification can also be achieved by buying investments in different countries, industries, company sizes or length of time for income generating investments.
Diversification is most often measured by analyzing the correlation coefficient of pairs of assets.
Investors can diversify on their own by investing in select investments, or they can hold diversified funds that diversify on their own.