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DIVERSIFICATION

Divided into different stocks and sectors, so that a single coin in one place does not sink the entire account.

Published by The Retail Trader · JUL 31, 2026 · Risk Management

Diversification — dividing into different stocks and sectors, so that a single coin in one place does not sink the entire account.

WHERE THIS FITS IN

This term comes under Risk Management, in the section “PORTFOLIO RISK”. Holding several positions together brings new kinds of risk:

RELATED TERMS TO READ

Other terms in this group — understanding them together is more useful:
• Correlation
• Concentration Risk
• Beta
• Systematic Risk
• Unsystematic Risk
• Overnight Risk / Gap Risk
• Event Risk
• Black Swan
• Liquidity Risk

To read the entire group and all its examples at one place, see the journal "RISK MANAGEMENT: DICTIONARY OF AVOIDANCE" - this term has been taken from there.

This entry is for educational purposes only and is not a recommendation to buy or sell. Exchanges change charges, margins, lot sizes and expiry rules from time to time, so verify any figures with your broker or exchange.

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