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Investment Dictionary

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Diversified Investments


Diversified investments are investments that are well diversified, which should include regional diversification, allocation between asset classes, sectors, maturity, denomination of currencies and other characteristics depending on the investment aim. 


Regional diversification is well represented by global investment, when different continents for investing are used. The more different securities or tangible investments are involved, the better diversification between investment asset classes will be.


Fundamental diversification should seek for investments that have negative correlation.


The better investments are diversified the better is the investment portfolio. Diversification is the main key to achieve effectiveness of the portfolio because well diversification reduces the risk of investment portfolio which is equal to increasing the return of the same portfolio. Every investor chooses his risk-return level and if he wants to receive higher return on investment. So lowering the risk is equal to increase of yield because separate investments may be replaced by riskier and with higher return if total diversification decreases the risk of total portfolio. That’s why diversified investments are so important.


(2) Also 'diversified investments' may have another meaning. It may represent sector of holding companies (holdings are investing in diversified portfolio). 


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