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Diversify

dy-VER-sih-fy /daɪˈvɜːrsɪfaɪ/

verbC1GMATGRE

formalbusiness

To make or become more varied; (in finance) to spread investments across different assets, industries, or regions to reduce risk.

A core principle of risk management. It's about not putting all your eggs in one basket, thereby reducing the impact if one particular investment performs poorly.

The story behind the word. The word 'diversify' comes from the Latin diversus, meaning 'turned in different directions,' which is the past participle of divertere, 'to turn aside.' It entered English in the 17th century with the general meaning of 'to make varied.' Its specific financial application, referring to spreading investments to reduce risk, became a cornerstone of modern portfolio theory in the 20th century.

Word relationships

Vary: To introduce variety; 'diversify' often implies a strategic spread for a specific purpose (e.g., risk reduction).
Branch out: To expand into new areas.
Expand: To become or make larger or more extensive.

Concentrate: To focus all attention or resources on a particular object or activity.
Specialize: To concentrate on a particular activity or product.

Word family

Diversification (noun): The process of making or becoming more varied.
Diverse (adjective): Showing a great deal of variety; very different.

Collocations

diversify portfolio
diversify investments
diversify income
diversify product line
diversify holdings

Example sentences

"Financial advisors always recommend that investors diversify their portfolios to mitigate risk." Investment advice
"The company decided to diversify its product line to reduce its reliance on a single market segment." Business strategy
"To truly grow, one must diversify their experiences and learn from various fields, not just their own." Personal development

Memory hook

To DIVERSIFY is to make your investments DIVERSE, like having a diverse group of friends with different strengths. DIVERSE investments.

When not to use

Do not use 'diversify' if the action involves concentrating resources or investments in a single area. It implies spreading out, not narrowing down.

Fun facts

The proverb 'Don't put all your eggs in one basket' perfectly encapsulates the concept of diversification.

Related words

Hedge, Mitigate, Prudent

Explore more words

diversification, Conglomerate, allocation, Hedging, portfolio, volatility