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In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.
Example investment portfolio with a diverse asset allocation. Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. [1]
Diversification involves spreading your money across a variety of investments and asset classes. A diversified portfolio helps to reduce risk and may lead to a higher return.
Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective.The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.
Economic diversity or economic diversification refers to variations in the economic status or the use of a broad range of economic activities in a region or country. [1] Diversification is used as a strategy to encourage positive economic growth and development. [ 2 ]
Diversification (finance) involves spreading investments; Diversification (marketing strategy) is a corporate strategy to increase market penetration; Diversification of firms through mergers and acquisitions
A financial forecast is an estimate of future financial outcomes for a company or project, usually applied in budgeting, capital budgeting and / or valuation.Depending on context, the term may also refer to listed company (quarterly) earnings guidance.
Simply stated, post-modern portfolio theory (PMPT) is an extension of the traditional modern portfolio theory (MPT) of Markowitz and Sharpe. Both theories provide analytical methods for rational investors to use diversification to optimize their investment portfolios.