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A Wall Street Craps Definition: Diversification

November 7th, 2011

diversification:

1. the act of placing money in a number of different investments in order to reduce the risk of overall poor performance caused by having too much money concentrate in any one investment.

2. when investors spread money around in a variety of investment classes in an effort to create more safety and less volatility in their results.

3. what many part-time amateur stock players fail to create when they concentrate their bets on the stocks of too few companies, industries, or market sectors in the naïve effort to achieve greater financial gains.

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“Behold the fool saith, ‘Put not all thine eggs in one basket’ – which is but a manner of saying, ‘Scatter your money and your attention’; but the wise man saith, ‘Put all your eggs in one basket and – WATCH THAT BASKET.’”

Mark Twain ~ American author & humorist (1835-1910)

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